Magellan Financial Group Limited (MFG) Earnings Call Transcript & Summary

Well, good morning, ladies and gentlemen. My name is Sarah Thorne, and I run Investor Relations at Magellan. And I will be moderating the questions received today. Before we formally open Magellan Financial Group's 2021 Annual General Meeting, I would like to go through some housekeeping matters in relation to today's virtual meeting. If you have any issues during today's live stream, please contact our share registry, Boardroom Pty Limited, on 1300 005 016 or 02 9290 9600. Or you can contact Magellan on 02 9235 4888. You can also find these contact details in the announcement that was lodged on Wednesday morning with the ASX. The instructions on how to view today's presentations in full screen now appear on the screen. To view the presentation in full screen, please click the square at the top right-hand side of your screen. To return back to the split-screen view, which will allow you to ask questions and vote, click on the arrow pointing at the right at the top right-hand side of your screen. If there are any questions from shareholders or proxyholders during the AGM, we will be happy to address them. Questions will be addressed immediately after the presentations today. Questions relating to items of business will be addressed once we've reached the relevant resolution. The instructions to submit a question during today's AGM now appear on the screen. [Operator Instructions] Please note that I will read out your name and, where appropriate, state who you are representing before reading out your question or comment. If we do receive multiple questions on one topic, we will amalgamate these questions and respond to them together, and we will do our best to get to the essence of the question. Shareholders and proxy holders can also ask a verbal question by dialing the relevant numbers shown on the main information page. [Operator Instructions] Thank you. I would now like to hand to the Chairman, Hamish Douglass, to formally open today's meeting.

Well, thank you very much, Sarah, and good morning, ladies and gentlemen. Welcome to Magellan Financial Group's 2021 Annual General Meeting. This is our 15th Annual General Meeting, which is now formally open as there is a quorum present. As you may know, my name is Hamish Douglass, and I will be chairing this meeting of shareholders. Due to the COVID-19 restrictions on public gatherings and for health and safety reasons and protection of our shareholders, the Board has agreed that it was appropriate to host this year's AGM virtually. Let's hope this is the last year we'll have to do this. I remind all shareholders that they will be able to vote and ask questions during today's meeting. I would now like to introduce our directors. Firstly, and they'll appear on the screen, Hamish McLennan, Brett Cairns, John Eales, Robert Fraser, Colette Garnsey and Karen Phin. I'd like to thank them all for everything they've done this year and welcome you all to this Annual General Meeting of Shareholders. I'd also like to welcome our company's secretaries, Marcia Venegas and Mariana Kolaroski. A brief biography of each appears in the company's annual report. We also welcome Clare Sporle, a partner of the company's external auditors, Ernst & Young; representatives of our share registry, Boardroom Pty Limited; and of course, Sarah Thorne, who you've all met earlier, from our Investor Relations area, who will be moderating the questions we receive today. Now I'll start turning to some formal business. The notice of Annual General Meeting has been forwarded to all shareholders. I will take this Notice of Meeting as read. I'll now take a moment to outline this morning's agenda. I will shortly make some opening remarks before handing over to Brett Cairns, our Chief Executive Officer, for his presentation. After Brett's address, we will respond to questions received from shareholders. Following this, we will consider the formal items of business, which are the receipt of the company's financial statements and reports; voting on the remuneration report; the reelection of myself, hopefully, and the election of Colette Garnsey as directors of the company; and finally, the issue of shares and the provision of related party benefits to Ms. Garnsey. Appearing on the screen is a formal disclaimer regarding any forward-looking statements that any of the directors and probably particularly Brett and myself may make today. All comments are subject to the formal disclaimer shown on the screen. Thank you. The minutes of the previous general meeting of members of the company, which was the Annual General Meeting held on the 22nd of October 2020, have been approved by the Board. These minutes are tabled and are available for inspection by any shareholder wishing to see them by contacting the company. I would now like to turn to my formal Chairman's address. Today, I will touch briefly upon some of the company's activities over the last financial year and also the firm's strategy looking forward. I would like to start by outlining the outstanding nature of our business and the significant opportunities we have to expand it further in the future. Our asset management business has significant scale with total funds under management in excess of $110 billion and world-class operating margins and profitability. Our business is broad. We have a diverse mixture of clients. We have a very large institutional business with more than $80 billion in funds under management across more than 130 relationships around the world. Our higher-margin retail business is also broadly based with funds under management of approximately $30 billion. The retail business covers deep and long-standing relationships with over 11,500 financial planners, including over 1,470 dealer groups and self-licensed practices. We have relationships with all the major stock-breaking firms and have over 120,000 direct investors in our funds. We already have market-leading franchises in global equities and listed infrastructure and have a scale business in Australian equities via Airlie, which is growing. We see significant opportunity to grow our core Funds Management business across 5 product areas outside of our Global Equities franchise. In recent years, we have undertaken significant investment in developing 3 new product capabilities in the ESG/sustainability space, our MFG Core Series of funds and now in the retirement space with the recent launch of FuturePay. It was pleasing to see that the Global Sustainable strategy run by our Deputy Chief Investment Officer, Dom Giuliano, secured its first 2 mandates during the quarter ended 30 September 2021. And we're pleased to let you know that we have received an additional mandate in October 2021. We are hopeful of more to come. We also see significant opportunities to grow our listed infrastructure and our early Airlie Australian equities franchises. These 5 important product areas are run by a very talented team of portfolio managers: Dom Giuliano and Alan Pullen in the ESG/sustainability space; Vihari Ross, Elisa Di Marco and David Costello for the MFG Core Series of funds; Paddy McCrudden for FuturePay; Gerald Stack, Ofer Karliner and Ben McVicar in the listed infrastructure strategies; and John Sevior, Matt Williams and Emma Fisher in our Airlie Australian equities franchise. We have a deep bench of portfolio managers. For the 12 months to 30 September 2021, we had net inflows of approximately $700 million and total funds under management of almost $30 billion across Listed Infrastructure, Australian equities, ESG/Sustainable, our MFG Core Series of funds and FuturePay. Funds under management in ESG/Sustainable and the MFG Core Series of funds both exceeded $300 million, and the Australian equities retail fund currently has approximately $200 million in funds under management. Success is never built overnight, but we are pleased with the progress we're making in each of these areas. To some extent, launching new strategies is like a snowball in that they start small and once they gain traction and critical mass, they can gain scale quickly. The following slide sets out the growth in funds under management from the ESG/Sustainable strategies since 2017. We have never disclosed this before. We are pleased with the progress. And importantly, we are gaining momentum. The following slide sets out the growth in the funds under management for the Airlie Australian Share Fund since its launch in 2018. As you can see from the graph, we have seen a significant pickup in momentum in the past 9 months. In comparison, we have set out in the following slide the funds under management for our Global Equities strategy over the first 5 years after the strategy was launched, which was the Magellan Global Fund, on the 1st of July 2007. Clearly, it takes time to gain momentum and critical mass after the initial launch of a strategy. We note the total funds under management in Global Equities is currently in excess of $80 billion after that slow start in the first 5 years. We intend to stay fully focused on our Funds Management business, the engine room of our operations, and we see significant opportunities for further growth in the years ahead. Expanding our core Funds Management business outside of our Global Equities franchise will further enhance the quality of our business. Our Chief Executive Officer, Brett Cairns, will outline in his presentation the progress we're making and the opportunities we have to attract new funds under management into existing and new strategies. Now turning to the results for the year. Overall, we believe Magellan's financial results for the year ended 30 June 2021 are satisfactory. Average funds under management increased by 9% to $103.7 billion. Reported profit after tax was $265.2 million compared to the $396.2 million for the year ended 30 June 2020. Brett will make further comments on this. Net profit before tax of the Funds Management segment was $556.7 million compared to $558 million for the year ended 30 June 2020. Excluding performance fees, net profit before tax of the Funds Management segment increased by 10% to $526.6 million. Total dividends of $2.112 per share compared with $2.149 per share for the year ended 30 June 2020. Again, Brett will make some further comments on the dividends for the year. I'm going to start with some elements of our business. I'm going to start with average funds under management. The 9% increase in average funds under management in 2021 was important as this measure largely determines the profitability of Magellan's Funds Management business from year-to-year. We essentially earn management fees, excluding performance fees, of around 0.6% per annum of average funds under management. The following slide sets out our average funds under management over the past 5 years. This shows that average funds under management has grown from $45.7 billion to $103.7 billion or a compound growth rate of 23% per annum. The future rate of growth in average funds under management will be driven by 3 factors: our ability to retain existing clients; our ability to attract new funds under management into existing and new strategies; and importantly, the investment performance of our investment strategies over time. I now want to turn to another important measure, net profit before tax and performance fees of the Funds Management business. As outlined in the 2021 annual report, the directors consider that net profit before tax and performance fees is the most important measure of the underlying financial performance of our business. The following slide sets out the profit before tax and performance fees of the Funds Management business over the past 5 years. As you can see, the profit has grown from $226.8 million in 2017 to $526.6 million in 2021, representing a compound growth rate of 23% per year or per annum, in line with the growth in the average funds under management. Similarly, the 10% increase in the net profit before tax and performance fees in the last year essentially matched the uplift in average funds under management over the last year. I now want to turn to performance fees. Performance fees are the icing on the cake for our shareholders. However, whilst performance fees are valuable for all of us as shareholders, they add volatility to our reported results. We are a very unusual fund manager as we distribute the vast majority of performance fees after tax to our shareholders as an additional dividend, which we pay with the final dividend, rather than use this revenue to pay additional bonuses to staff. The stock market may not reward Magellan for volatility in its reported profitability in the short term, but performance fees contribute meaningfully to shareholder returns over time. We have set out in the following slide the performance fees earned by Magellan over the past 5 years. You can see clearly this is not a straight line. The performance fee dividends paid to shareholders over the past 5 years have totaled $0.959 per share. Since inception, the objective of the Magellan Global Equities strategy is to deliver a compound returns of 9% per annum on average net of fees over the medium term with materially lower downside risk than stock markets. Unfortunately, the market environment over the last 12 months has not been conducive to the lower-risk nature of Magellan's Global Equities strategy, and a few issues have also negatively impacted our performance. The resulting short-term relative performance of our Global Equities strategy and the impact that this may have on our funds under management inevitably creates short-term uncertainty. This is in the context of the Global Equities strategy delivering strong positive returns in line with our objectives during this period of relative underperformance in comparison to world equity markets. Nonetheless, we believe our major clients have a clear understanding of the characteristics of our Global Equities strategy, which has consistently delivered on its objectives. Furthermore, I can assure you all as shareholders, we are not complacent, and we continue to be highly focused on investment results for our clients and also very focused on communicating with our clients. We have confidence in our investment strategies and believe they'll continue to deliver very satisfactory outcomes for our clients. Over -- our long-term focus and client obsession have created substantial long-term shareholder value, and we're not about to change course. I'm reminded by the famous quote from Ben Graham, who said, "In the short term, the market is a voting machine. And in the long term, the market is a weighing machine." In summary, we have an exceptional business and are committed to addressing the current market challenges and continuing to achieve long-term growth. Brett will shortly outline in his address the progress we're making across our entire Funds Management business. In the past 12 months, Magellan has made a number of investments outside of our Funds Management business. These investments form part of our new investment business -- sorry, our new business segment, which we have called Magellan Capital Partners. The investments we have made in the 2021 financial year are a 40% economic interest in Barrenjoey Capital Partners Group, a 12% shareholding fully diluted in Guzman y Gomez (Holdings) Limited and a 15% interest fully diluted in FinClear Holdings Limited. All of these initiatives are investments for the future that we believe can add meaningful additional earnings streams, create a more robust and diverse business and ultimately create meaningfully -- meaningful shareholder value over time. Despite some of the reports you may read, we are very satisfied with the excellent progress to date of each of these businesses. Importantly, I'm also pleased to report to you today that for the 3 months to 30 September 2021, the Magellan Capital Partners segment was profitable, and we are confident of the prospects and potential for each of these investments. It is also noteworthy that FinClear completed a capital raising at multiples of the price we paid for our interest last year. Just to say that again, the Magellan Capital Partners segment was profitable for the first 3 months of 2021, and FinClear completed a capital raising at multiples of the price we paid only last year. While it's still early days, we believe Magellan Capital Partners is firmly on track. We will provide further information on these businesses as they start to contribute more meaningfully to Magellan's profitability. Finally, Paul Lewis retired from the Board as a nonexecutive director on 30 September 2021. Paul joined the Board in 2006 and also chaired our Remunerations and Nominations Committee and has been a director of Magellan Asset Management Limited. This is the end of a chapter, and I look back with extreme fondness and a touch of sadness on Paul's retirement. Paul's counsel, insight, support and, importantly, his friendship over the past 15 years has been invaluable. On behalf of all our employees and shareholders, I'd like to personally thank Paul for everything he has done for Magellan. I would like to thank all of our colleagues at Magellan for all their dedication and hard work this year. It has been a challenging year in many respects for our employees and their families. And I can assure you, every one of our employees gets up every working day seeking to do their best on behalf of you and importantly, on behalf of Magellan's clients. I would also like to thank each of our shareholders for your ongoing support of Magellan. I would now like to hand to Brett for his CEO's address.

Well, thanks, Hamish, and thanks, everyone, for attending the meeting today. Hopefully, as Hamish said, this is the last meeting that we'll be doing as a virtual-only meeting, as I think we're all looking forward to the difference it makes to be able to meet in person. Picking up from Hamish's remarks, I'd like to start by briefly discussing the results for the 2021 financial year and then spend some time discussing our asset management business, its progress and growth prospects. I will then briefly update shareholders in each of the businesses that Hamish just mentioned in Magellan Capital Partners before handing back to Hamish and turning to questions. As Hamish has touched upon, we believe the 2021 financial year results were satisfactory with average funds under management increasing 9% to a little under $104 billion. This, in turn, as Hamish explained, drove a 10% increase in the profit before tax and performance fees of our asset management business to $526.6 million. We focus on profit before performance fees because, as Hamish went through, performance fees tend to be lumpy and irregular and so can distort the year-on-year comparisons, which has been the case this year. Including performance fees and the equity accounted effects of our investments in Magellan Capital Partners, our adjusted net profit after tax decreased from the previous year to $412.7 million. It is important for shareholders to understand the nature and nuances of equity accounting, and it's often not straightforward, and I would point to our annual report where we provide more detail. We've also discussed in the annual report the adjustments we have made to arrive at our adjusted net profit after tax figure. So I won't dwell on those here other than to say the vast bulk of those adjustments relate to the investments we made as part of the restructure of the Global Equities Fund and the required accounting treatment of the associated options. We believe these strategic investments will add substantial value to Magellan over time. Without the adjustments, the group's statutory net profit after tax for the year was $265.2 million. Dividends for the year totaled $2.112 per share, 75% franked at the corporate tax rate of 30%, down marginally, as Hamish mentioned, from $2.149 per share last year. This comprised an ordinary dividend of $1.997 per share, which was up 8% from the previous year and in line with -- broadly with the increase in average funds under management, and a reduced performance fee dividend of $0.115 per share. The dividend policy is to pay out 90% to 95% of the asset management business after tax -- the after-tax profit. This includes performance fees, so the lumpy nature -- their lumpy nature will be seen in our total dividends from time to time. Let me now turn to our asset management business. Magellan's asset management business was founded on a key premise, and that is that we put our clients first. The business has always focused on achieving the investment objectives we have set for our investors, and we are constantly reminded, of course, of the responsibility we have in managing other people's money. We have sought to provide improved outcomes for our clients by solving problems, reducing transactional friction, broadening access to our products and, indeed, investing to provide benefits for our investors in what we have always considered to be a partnership. And nothing has changed in this regard. Our client focus is as zealous today as it was when the business was first started. Our business has developed considerable strength, as Hamish mentioned, and resilience and is founded on a highly scalable platform. Our investment process is rigorous, risk-focused and supported by a team skilled with now accumulation of great experience. Our distribution team is relationship-centered. And firm-wide, we have developed deep knowledge. We've invested, as Hamish has mentioned, to develop a range of offerings targeted at specific needs, which we have -- which have substantial growth opportunities. We believe the growth prospects of our asset management business to be very bright. The business has grown significantly since the global fund was launched 14 years ago. And today, the business serves a broad and diverse client base, which spans, as Hamish again mentioned, over 130 institutions located here and around the world and many thousands of retail customers across Australia and New Zealand. Our retail business is founded on the bedrock of deep, long-standing relationships with a very important financial advice industry, including all the major stockbroking firms. We also have a large and growing direct unitholder base of over 120,000, reflecting, in part, the increasing self-directed investor -- the use by the self-directed investor of our 14 retail funds, the majority of which can now seamlessly be accessed both on and off exchange. Our flagship Global Equities franchise consists of a main strategy managed by Hamish and Arvid Streimann and a high conviction strategy managed by Hamish and Chris Wheldon. Together, they represent over $80 billion of funds under management spread across institutional and retail clients. Our investment process focuses on quality, and we aim to invest in the world's best. The main Global Equities strategy utilizes a portfolio of 20 to 40 stocks and has a particular objective of targeting compound returns of 9% per annum, net of all fees, while importantly limiting downside risks. Most significantly, these objectives have been consistently met over the 14 years since inception, including across the various subperiods that may be of interest. It is important to understand a fund's overall objective and how a manager sets about achieving them, especially, as Hamish mentioned, during the inevitable periods where outcomes may differ from other approaches or broad market indices at any one time. Hamish participated in a webinar just last week in which he clearly and succinctly discussed these issues in relation to the global fund, and I would encourage shareholders and others who may be interested to watch the replay, which can be found on our website. Away from the Global Equities franchise, we have around $30 billion of funds under management across 5 different areas: Infrastructure, Australian equities with Airlie; ESG/Sustainable; MFG Core Series; and lastly, FuturePay. Each of these, of course, are at a different stage of their development, and each has significant growth opportunities. Each represents a differentiated offering. And each, we believe, addresses a particular need or help solve a particular problem. The longest-standing and the largest of this group is our Infrastructure business led by Gerald Stack. Gerald and his team has developed a significant business over the years. The business serves both institutional and retail clients and has a broad base. For example, the ASX quoted ETF, which is under the code M-I-C-H, MICH, is now approaching 20,000 unitholders. Infrastructure is continuing to be more broadly accepted as an asset class of interest by consultants and institutions, but it remains still relatively underrepresented in portfolios. Magellan has a unique approach to defining suitable infrastructure investment. This, coupled with being available to investors either as actively managed in the Select strategy or systematically overseen at lower cost by the core strategy, provides a differentiated offering of wide appeal. We are confident of continued growth in our Infrastructure business with the Select strategy having additional capacity of more than $2 billion and the core strategy many multiples of that. Our Australian equities business is run, as Hamish mentioned, by the team at Airlie. Led by John Sevior, Matt Williams and Emma Fisher, the Airlie team is backed by some of the most experienced and, importantly, most trusted people in the business -- in the industry. Airlie's client base is largely institutionally focused with John and team having deep and multi-decade-long relationships. Airlie's experience and approach have served those clients well over many years and across a variety of different, indeed, difficult market conditions. In addition to this institutional business, Airlie is building a retail franchise, which is beginning to gain real traction. The Airlie Australian Share Fund, which is listed on the ASX under the code AASF, recently passed its 3-year track record and has performed strongly, meaningfully outpacing its benchmark. The fund carries recommended ratings from the main rating houses, is appearing on a growing number of approved product lists and is available on key platforms with even more being added. As Hamish noted, this has led to increasing and consistent inflows, and we believe there are great prospects for this to continue and accelerate. AASF was the very first fund to be offered with dual access, and that is off exchange via traditional routes of direct application, redemption and via platform and also on exchange via trading on the ASX. Both routes have been actively and consistently used, and the fund is now nearing 1,000 unitholders. Our ESG/Sustainable strategies have passed their 4-year track record, an important milestone in what is becoming a fast-growing and important space globally. Led by Dome Giuliano and Alan Pullen, as Hamish mentioned, Magellan has established a differentiated offering, particularly with regards to how we approach carbon. Hamish has rightly pointed out that success is not built overnight, but we have used the past few years not only to develop track records but also to build client and consultant relationships in this field. We are very pleased that this is beginning to bear fruit with our Global Sustainable strategy being awarded several new mandates with others to be finalized. We are confident there's a growing recognition of our approach to and particularly our time in the ESG/Sustainable space. We believe there is significant growth prospects for these strategies in what is already a large and addressable market that is growing quickly as custodians and trustees respond to their constituents' concerns. We also launched the Global Sustainable strategy as a retail fund late last year with dual access and listing on the Chi-X exchange. Our capacity in ESG and Sustainable is large at around USD 20 billion. Also, late last year, we launched the MFG Core Series. Currently, there are 3 retail funds in the series: Core International managed by the Vihari Ross, Core ESG managed by Elisa Di Marco, and Core Infrastructure managed by David Costello. Each of these again are dual access and are listed on the Chi-X exchange. The MFG Core Series leverages Magellan's core DNA -- research DNA to actively construct portfolios of between 70 to 100 stocks. These portfolios are then continuously monitored and systematically managed over time using a proprietary technique. Management fees are attractively priced at about 0.5% per annum. We believe the approach employed by the MFG Core Series is thoughtful and differentiated relative to many systematic and factor-based fund alternatives. There is growing demand, of course, for lower-cost exchange-traded funds to build portfolios, stretching from the millennial investor to the evolving managed account sector. We believe the MFG Core Series offers an attractive choice in this regard. The fund has received recommended ratings and is beginning to appear on approved product lists and is available on some key platforms with more to be added. Although it's very early days, we believe the MFG Core Series has significant growth prospects in an area that has very large capacity. Lastly, FuturePay. FuturePay, which is managed by Paddy McCrudden, was launched just in June this year and is aimed primarily at the retirement income market, as Hamish mentioned. Given that FuturePay is relatively new and there has been some interest in this area, it may be useful for me to take some time here to outline to shareholders the thinking behind this product and why we believe it helps to meet an important client need. Assets in postretirement are already large at around $0.5 trillion, and that's a trillion with a T, and this is set to expand to $2 trillion over the next 20 years. Some $60 billion moves from accumulation to decumulation each year, and the demographics is such that this must increase. This is a staggering amount of money. What's immediately noticeable in this large market is that there are few, if any, products that truly help retired investors solve the dilemma they are forced to face, which is the stark realization that they must figure out how to use their accumulated savings to replace what was once a known salary, and they have to do that for an unknowable period of time. It's a very tricky problem, which may help explain the lack of available products. The reality is that the goals in decumulation are very different to those in accumulation. And so it needs to be looked at in a different way. In accumulation, your focus is on maximizing the amount of money available to you when you retire. Your day-to-day living requirements are covered by your ability to work and the salary that comes with it. Whilst not always easy to execute, the accumulation goal is relatively straightforward, and alternative approaches can be considered and importantly measured using familiar terms such as risk and return. This is not the case in the decumulation. In decumulation, the goals switch to a focus on achieving a knowable, stable income and ideally one that increases to cover inflation because you no longer have access to a salary. But there's a catch. You can't achieve this by eroding your capital because you don't know how long you're going to live. And you can't achieve this by locking up your money because things happen, particularly as you get older, and you may need to access it. The problem is these 3 things, a stable inflation-linked income, capital growth to alleviate capital erosion and access to capital, are all connected and conflict with each other. And the conflict is acute. Maximizing one usually means giving up on another. So how do you think about this? How do you measure an outcome to figure out if one approach is better than another? In our view the only way to deal with this realistically is to look at the combination of the objectives rather than each individually. And so we developed a thing called a measure of investor utility. The notion of utility has been around for a long time and essentially reflects the overall benefit to the investor. By looking at ways to maximize investor utility, that led us to the development of FuturePay. Without getting lost in the detail, FuturePay is simply a dual access fund, listed on the Chi-X exchange with the code FPAY, that invests in a portfolio of our combined low volatility Global Equities and Infrastructure strategies. The fund pays a fixed dollar amount of distributions each month rather than a percentage amount that will move around, and the distributions go up in line with inflation each quarter. This satisfies the objectives of income, growth and access to capital that I mentioned. What is unique about FuturePay, however, is that it also has the benefit of an in-built reserving process that utilizes a pool of that reserves that sits alongside the fund. It is the effectiveness of this and the efficiency of this reserving feature that we believe adds significant utility and benefit to the product because the reserves, when you think about it, can be used instead of the portfolio in times of poor market conditions to support the regular income. And the portfolio, therefore, can be more invested than otherwise would be the case to take advantage of recovering markets, which leads to a better overall outcome over time. So for example, FuturePay currently has about 31 months of distributions available in that reserve pool, which means that the extreme distributions would be covered for that period of time without having to touch the portfolio. Although it's very early days for FuturePay, we have received positive feedback, and the fund has already attracted over 150 unitholders. We are working our way through the necessary rating and platform processes. And very recently, FuturePay was added to some key platforms. Indeed, the research house, Lonsec, has just completed its review of FuturePay and approved it, noting in its report it was more intuitive, flexible and simpler than other retirement income solutions it had seen. Again, success is not built overnight, and we are very patient in that regard. Before leaving this topic, it is worth noting one final thing. The federal government is in the final stages of introducing what is known as the retirement income covenant. This is to apply to the trustees and superannuation funds and seeks to set out what trustees are expected to consider in providing income in retirement for their members. It is notable that the covenant, by and large, covers what we just discussed, and that the outcomes of FuturePay are strongly aligned with the objectives the government is proposing to set. As such, we have been approached by a number of institutions and are in the very early stages of discussing possible applications. As Hamish has noted, we believe our asset management business has significant scale and depth with material growth prospects across a range of areas. These areas are at various stages in their growth and are targeted to serve a need or help address a problem, which, in our opinion, maximizes the chances of success. Our average funds under management in the asset management business for the first 3 -- for the first quarter of this financial year stood at $115.5 billion compared to $99.7 million for the same period last year, and our expenses are tracking in line with guidance. Now let me turn briefly to Magellan Capital Partners, which Hamish has touched on. We established Magellan Capital Partners to consider possible balance sheet investments which could bring strategic benefits to the firm, overlapping perhaps directly with our asset management business or indirectly by providing diversification or optionality in a particular area. And we hope that to bring and have scope to enhance the firm's intellectual capital. Because we are investing shareholders' money, we, of course, also require them to have strong prospects of generating high financial returns. But there's an important balance that needs to be struck here. We cannot make an investment that may distract us from our core asset management business or our clients, and this is paramount to Hamish and the investment team, of course. Frankly, this is the first filter when considering an opportunity and necessarily limits our opportunity set because we must be convinced that we are partnering with strong and capable management teams. We have, therefore, structured ourselves internally to ensure we remain focused whilst having the appropriate oversight of our investments. Craig Wright is charged with running Magellan Capital Partners and reports directly to me. Over the years, Craig and his team have gained a material experience and developed great skills across a range of areas, and they are well suited to the task. Let me now briefly discuss each of the investments within Magellan Capital Partners. Firstly, FinClear, as Hamish has touched on. FinClear, some may know, provides important trading infrastructure, services and technology solutions that support businesses in the wealth and stockbroking industry. For example, FinClear owns iBROKER, which is a posttrade system that underpins more than 15% of all transaction volume traded on the ASX and the Chi-X exchanges and including everything that's traded through CommSec. FinClear has grown strongly both organically and by acquisition in an industry that has been consolidating. Recently, FinClear purchased Pershing Securities Australia, which has added significant scale to its business. This has expanded FinClear's effective HIN platform from around $10 billion to over $130 billion and taken its client base to 250 -- over 250 wholesale intermediaries and more than 300,000 active end users. FinClear is developing a meaningfully connected network across the whole process of trading and execution and is especially focused on the important changes and opportunities that will arise as the result -- as the ASX builds out its distribution -- distributed ledger technology. This provides a unique platform. And through our partnership with FinClear, we continue to explore ways to improve access and reduce friction for investors. We have invested $23 million and own a 15% fully diluted stake in FinClear. Hamish mentioned this. It's worth noting that FinClear recently completed a small capital raising at a price that was around triple our average entry price, and it is likely to IPO sometime next year. Next, Guzman y Gomez, often called GYG. I'm sure many of you know, Guzman y Gomez is a quick service restaurant chain that specializes in making and serving made-to-order food, clean and authentic Mexican food. Some shareholders may have already tried, as I say, their spicy chicken nachos. And if not, I highly recommend it, something I might get for lunch. GYG currently has 158 restaurants globally, of which 120 are franchised and 38 are company-owned. Most restaurants, 138, are located in Australia with the remainder in Singapore, Japan and the U.S. Global sales last year topped $445 million. Magellan has been a constant investor in the quick service restaurant space since our inception. And as a result, the firm has developed deep industry knowledge and, importantly, industry connections. We believe that GYG has already established a significant brand, which, combined with more people trying and enjoying their food because of COVID-19, is leading to GYG capturing an increasing share of the consumer's mind. GYG has a well-established long-term plan for restaurant rollouts with 30 planned for next year alone. With 138 restaurants in Australia compared with McDonald's at around 1,000 and KFC at 650, GYG clearly has a long available pathway ahead, especially as it builds out its drive-throughs -- drive-through offering, which has proved extremely popular and which has excellent unit economics. GYG is also making meaningful progress on tackling its opportunity in the U.S. Whilst it is very early days, the opportunity is vast and could be very material to GYG over time. For example, to put things in context, Chipotle has over 2,800 restaurants in the U.S. and has a market capitalization of USD 50 billion. Notwithstanding, GYG is investing in growth. It is profitable and has significant cash on its balance sheet. We have invested $103 million and own a 12% fully diluted stake. Finally, Barrenjoey Capital Partners. Magellan is one of the founders of Barrenjoey and holds a 40% nondilutive, so we can't be diluted, economic stake in this business. We have invested $156 million for this interest. Barrenjoey is a new full-service financial firm, which was formally established in September 2020. Barrenjoey has an unconstrained business mandate and is initially focused on 4 key business lines: corporate finance, including equity capital markets and debt capital markets; equities, which include sales and trading, equity financing and derivatives; fixed income, which includes sales and trading and derivatives; and research. The opportunity to establish Barrenjoey came about because of a confluence of unusual events and timing but was also based on an underlying premise that a client-centric, partnership-oriented, globally connected but locally run firm would attract some of the best talent in the industry. And this has proved to be the case. The firm has over 290 people join from over 85 different institutions. And the breadth and depth of their skills and the relationships they bring are extremely impressive. As a relationship -- as is the relationship that is developing with Barclays PLC, one of Barrenjoey founders. Barclays' broad global connections, coupled with its deep financial resources and skills, has quickly resulted in meaningful results for Barrenjoey's clients, and synergies between the 2 businesses are growing and improving. The combination of these things has resulted in a very successful launch, and the business is already capturing meaningful market share. To date, the equities and corporate finance businesses are live. Research is building coverage, and fixed income will begin trading imminently. The derivatives and equity financing offerings within equities and fixed income are planned to come online in the first half of 2022. Despite not all business lines being up and running, the firm has achieved profitability for the first 3 months of the financial year with revenues tracking ahead of expectations. We believe Barrenjoey represents a rare opportunity to invest in a business of potential scale. For context, the addressable market in Barrenjoey's 4 current lines of business equate to around $5 billion of revenue per year. We believe it is highly likely that Barrenjoey will become valuable to Magellan over time. We are pleased with the progress of Magellan Capital Partners. And as Hamish has noted, our share of profit or loss are -- is positive in the quarter ended 30 September 2021. In conclusion, we believe Magellan's business is well positioned. Our core asset management business has significant scale and serves a diverse client base. There are clear areas of growth, each with substantial prospects and each serving clients' needs. Our investments through Magellan Capital Partners are performing well, and I'm pleased to report we have navigated the impact of COVID-19 well with our staff safe and fully engaged. Finally, before handing back to Hamish, I would also like to add my thanks to Paul Lewis, who I'm sure is attending this meeting. Hi, Paul. Paul and I effectively joined the Magellan Board at the same time back in late 2006, early 2007 as nonexecutive directors. The business, of course, was different then to what it is now, and Paul has been a constant throughout that journey. Paul's insights, experience and support have been an important part of the Magellan success story. Whilst all things must end at some stage, it is nevertheless sad to see Paul retire from the Board. On a personal note, Paul, thanks for all the help and the counsel over the years and especially our friendship, which I look forward to continuing over the coming years. Back to you, Hamish.

Well, thank you very much, Brett, and I hope shareholders found your review very useful. We certainly provided -- or you provided certainly a lot more detail in some of the businesses and your thinking of how they may roll out in the years ahead. Sarah, we will now move to answering shareholders' questions that relate to those addresses.

Thank you very much, both Hamish and Brett. We will now move to questions, and questions relating to items of business will be addressed once we reach each relevant resolution. We'll just go through how to ask a question again. [Operator Instructions] And again, if we do receive multiple questions on the one topic, we will look to amalgamate these questions and respond to them together. Please now take the time to submit your questions. In the meantime, we will just go through some questions that we received in advance from shareholders. Hamish, we did receive numerous feedback from multiple shareholders about the share price decline, particularly since we announced our full year results. Are you able to comment on the share price decline and what Magellan is doing to address this issue?

Well, thank you very much, Sarah. It isn't surprising we've had this question at all. Look, we're always very focused on the long term. And as I made that quote from Ben Graham, "In the short term, the market is a voting machine. In the long term, it's a weighing machine." We remain, and I hope people can see, very, very focused on a long-term strategy at Magellan and remain highly confident about how that strategy is going to roll out both within our asset management business and with Magellan Capital Partners. There have been 2 uncertainties that I think has affected short-term sentiment around our share price. First of all, the relative underperformance of the Global Equities strategy and whether that is going to lead to outflows or not. Our business is much more than just the Global Equities strategy. I've been seeing all our major clients around the world and have had very, very positive feedback. We haven't lost a single Global Equities client -- institutional client, I think, in a year, certainly not during any period of underperformance. I'm not guaranteeing it's not going to happen, and someone could ring us up tomorrow that I'm unaware of. So -- but that is some uncertainty, and we understand people's uncertainty. We can't wave a magic wand, but we are confident about the strategy, and it continues to deliver on its objectives. And the other area of uncertainty was the accounting losses we reported from Magellan Capital Partners last year. We tried to explain those losses. They were largely noncash. They largely related to the start-up costs associated with Barrenjoey. It was a business that effectively had 8 weeks of revenue and a full year of costs, all the setup costs, all the infrastructure costs and, importantly, staff sign-on costs. And we bought them all in the first year but only had 8 weeks of revenue. Already in the first 3 months of this year, the business is profitable, as Brett has disclosed. And we've got a tremendous -- and it's not even firing on all cylinders yet with more businesses about to start up within in Barrenjoey but still bearing all the costs, yet not all the business operating at the moment. So we would hope in outlining both around the opportunities we see across our Funds Management business and also now Magellan Capital Partners being profitable in the first quarter, maybe people will start to focus a little bit more. And we don't want to overdo it because it's still early days. But over time, we'll give people more and more information as they start to grow in at scale. And we'll give people more information as those 5 key product areas outside Global Equities continue to grow in scale. We've given some more information what's going on underneath the hood, and we're very satisfied. And as we said, it's like a snowball. These things start slow, and then they can gain scale quickly. We've planted a number of seeds over many, many years. And now we're starting to grow some trees. And hopefully, those trees will grow into forests. The short-term relative performance of the Global Equities strategy, we can't do anything other than stick to the strategy and communicate with our clients. We're confident about the outcome, but that's created uncertainty in the short term. But overall, I hope all the information we're giving our shareholders today, we're trying to be as transparent as we can. We're trying to give more detailed information. And ultimately, the market will make its own judgment up. We're respectful of the market. At the end of the day, in the long term, we'll be judged about what happens to the company over time, and we're quite confident about what's going to happen over time. But there has been some short-term uncertainties. One, I think, we've addressed today in detail, hopefully, around Magellan Capital Partners now being profitable. But I hope that provides more context. But I think a lot of Brett's address and my address was probably aimed at some of these uncertainties that have been in people's minds. Brett, have you got anything to add there?

No, Hamish. You've covered everything. I won't add any more to that.

Thank you. I will now move on to another question received by a shareholder, and it reads. "I'm interested to understand how the Board is taking action to counter the significant erosion of MFG's economic moat, which has historically been enjoyed. It appears there are many threats with further erosion expected such as a new competitor with a significant IPO from a U.S. company, and the market suggesting MFG fees and charges are higher than competitors and whether this warrants -- whether MFG has delivered value that warrants higher fees. All these factors are resulting in significant shareholder loss. How will MFG's publicized strategic initiatives and direction help to recover the loss of economic moat and how a further risk to erosion being met? What is Magellan's point of difference that gives good reason for shareholders to retain their money with the organization?"

Yes. Well, Sarah, hopefully, today, we're giving people a lot of information. I don't think there's been much change around the economic advantages or the breadth of our business. I think we've outlined just the absolute scale of our business across our retail business with over 11,000 financial advisers, over 1,400 financial planning firms, 120,000 individual unitholders, 130 institutional clients, 14 different retail funds. We've got 6 different strategies in different areas of their development. We've actually got a very, very broad and very, very scaled business. And I don't think people should correlate just a short-term uncertainty that is related to the share price falling over a period of a number of months, which we're largely not in control of, to actually what the core long-term basis in the business. So I don't accept that the business has suddenly suffered a massive sort of change in its competitive position. We have some tremendous advantages. And we have to -- remember, we're in a competitive industry here. Clients can take their money any days of the week. We think we've got a very, very strong brand proposition. I think in the institutional space, we're in people's low volatility strategies. And I haven't found any sort of institutional investors who actually find any sort of concern about what's going on. It's actually very much in line with other lower volatility strategies. We've got other parts of the business that are really starting to gain traction there. Some of them are smaller, but they can start gaining traction. And we started building these years ago. They're not in reaction to what's happening today. We were building the business years ago in areas of ESG and Core, and FuturePay is being developed over 4 years. It's not like we're doing some knee-jerk reaction that the share price has gone in 3 months, and we're changing strategy, trying to address that. Now on the question of fees and which was a second part to the question, which is different to competitors, we've always got our competitors. And we faced competitors from day 1. And yes, there's always going to be competitors around. Actually, globally, we've built an institutional business. So I can tell you, there's a lot more people we compete around the world than who we compete against in Australia. And we've done fine there, and we kind of haven't lost any business that we've won offshore. On fees, on the institutional business, which is $80 billion in funds under management, we haven't seen any questions or pressures on fees whatsoever. We are highly, highly competitive there. In the retail market, you have to split it down and not simplify. There is an element of the advice business that are looking for low-cost solutions, and money is moving to passive. It's just not active people coming in. They're moving to passive strategies. It can be incredibly low cost in buying the index. We have a solution in the middle, the MFG Core Series, that is priced very competitively for what it is at 50 basis points for that segment of the market that is there. There is also a part of the retail market. And now we've got direct investors, 120,000 of them. We've got a very broad advice business. Some of that advice business have something called a management account solutions where they're looking for more institutional relationships. We have one solution in that space out of our high conviction strategy, and we are looking at other solutions in that part of the market which is much more institutionally orientated, how they've set them up. So we're peeling the onion. But do we think our overall proposition is uncompetitive in the retail market? No, we don't. We're not about to slash fees. It's not something that we're hearing. But we're hearing people want particular solutions, and we've got it in Core Series. And we'll probably have another solution in the managed account space there. So if anything, in the managed account spaces, we just haven't been gaining business in that area for a number of years. So having a solution in there is probably something where we could probably gain some business. We're in an area where we're really not competing in there. We've also innovated in so many different areas. Losing out -- are we losing our economic moat? What's happened in FuturePay and what happened in the innovation of everything going on exchange, I would argue there's a lot of innovation, an incredible amount of value that Magellan has brought to the table. And I don't think that's suddenly changed or eroded just because the share price has gone down over a period of 3 months. It's reflecting some uncertainties, not a loss of sort of the broadness or what's in our business. But asset management is a competitive industry, and we have to earn our keep. And Brett, maybe you want to make a few comments there. But it's a very good question from a shareholder, I have to say, broad and I think an important question for people to be asking.

Yes. Look, I mean, again, I won't dwell on the topics you've covered, Hamish. The reality, as you say, it is a competitive business. Yes, there may be more people coming in and have a bit more choice. It's been going on for a long time, obviously, with -- as you mentioned, Hamish, the low-cost index-based solutions. I think the key, clearly, is that we need to remain relevant to our customers. And of course, that stems all the way from generating returns and hitting, as I said through that speech, hitting the objectives that we've set. And we're clear and we articulate what we're trying to do there. That stretches, of course, from institutional clients but very importantly, across retail. But of course, we're looking to respond to the various demands that people want across the market. But we also want to do it, in our view, in a thoughtful way that does meet those needs and, as I say, address a problem. So to us, our approach on that, we think, is somewhat differentiated. And it's led to those things that Hamish was touching upon like active ETF and one unit and all these sorts of things to move some of that friction out of the system. And indeed, as I mentioned, we are looking further at that. There are other things that we can do there to help our relevance and help our clients actually in their journey across all that. So I agree with you, Hamish. I think that the -- we are necessarily responding and working in exactly the same way that we've always done on all this. Of course, there's going to be competition. And we need to -- at the bottom of this, we need to remain relevant to our customers, and that's what we're focused on.

1 And Brett, I would add there in terms of competition, people need to understand that the barriers to entry, particularly in the advice market, are pretty high. So if somebody is listed here or something, there's been competitors going for years and years and years trying to enter that market. Very few people have ever got scale because we're very lucky we have Frank and his team. It is super, super hard to do, and there's so many more obligations being put on advisers that it's made it harder for people to get scale quickly in that business. So there's competition, but it's a hard business as well. And some of the innovations that Brett and his team has led in the market, if you look just what we did in active ETFs, it's the big issue in the world now, Magellan was the first place of any scale who got active ETFs on exchange. The one-unit solution that Brett's team came up with, where the off-market sort of mutual funds and an on-market exchange all got merged into a single unit, that had never been done before. And I can tell you, what's going on in FuturePay as we speak to some institutional people around the world, and they look at this, they just say, "This is a world's first." So have we lost our edge? We've done a number of cutting-edge things underneath the surface that we're not copying others around the world. We're kind of leading people around the world. So have we suddenly lost our edge? I don't think so, but it's a competitive business, and we're very happy to compete with people.

Thank you both. Moving on to another question on capital management, and this was received by a number of shareholders so I will collate. We've recently established the DRP, which means we're retaining a small amount of capital. Can you touch on the specific projects that the retained capital will be used for? And then just 2 sort of further follow-on questions that relate. In establishing the DRP, what was the rationale for continuing to pay unfranked dividends if the Board would like to retain capital? And was it considered to actually cut the dividend payout policy?

Yes. Of course, we look at all options. We think a dividend reinvestment plan is an incredibly fair way if we are going to raise a modest amount of capital because it's completely voluntary. There's no dilution. If you don't want to participate in it, you don't have to. And it's offered to all shareholders on the same. To that point, it's actually very modest in the scheme that we're raising. What -- specific projects. The first thing we're doing is in the last 12 months, we spent over $300 million. And actually, we've always believed in having a fortress-like balance sheet. And effectively, we're just rebuilding the reserves. We don't want to take debt on and things at Magellan. We want to have a fortress balance sheet. And what it does is it gives you flexibility and to act very nimbly when opportunities arise. So like the opportunity in GYG came at us very, very quickly, as FinClear did. And if we didn't have any money, we would have been scrambling around working out. So having a balance sheet of having sort of some firepower in it, I think, is important. And often, things come at you when things aren't favorable as well. Do we have any opportunities? At the end of the day, we've got a small stake in Guzman y Gomez. We have preemptive rights. Over time, there will be liquidity events in the future. They're hard to predict. They're hard to predict, the scale. But on the right terms, if other shareholders wanted to sell, on the right terms, we'd be delighted to increase our holding in Guzman y Gomez. [ And I don't mean to scold ]. They know that as well, but it would be on the right terms and actually having some liquidity around. And also, from time to time, Craig's group will come across some opportunities. And if there are opportunities that make sense, we're not about to rush off and do heaps of large things. But just having that flexibility, we think, is important. The last question was the question about why didn't we just cut the dividend to retain more money? We -- and because of the franking credits because we don't fully frank it. There is a legitimate question sitting there that -- shouldn't we just cut the dividend? But what we're moving is effectively, from a pro rata voluntary scheme, enforcing everybody to invest part of their holdings. So the dividends we know are incredibly important. Even the unfranked component, people end up really between 70% and 85% or 90%, depending if you're a superannuation fund or what your individual tax status. Individuals may be a little bit more than that in the incremental tax on that small part of the dividend that isn't fully franked. And we also note that the offshore banking unit framework that has led our effective tax rate to be below 30% is why we can't fully frank. By FY '24, in a few years, we're going to be fully franking the dividend. So we kind of don't want to chop and change the dividend policy of cutting it down to retain some cable -- capital and then increase it when our franking goes back up. And I'm sure you -- if we surveyed the shareholders, would they prefer us running a very small DRP and maintaining paying out 90% to 95% of our earnings, even with some of it being partially franked, or we cut the dividend to get the same net result to shareholders, I can imagine the survey would be overwhelming, do not touch the payout. And so we don't want to do things -- this is a voluntary scheme that people want to reinvest rather than forcing all shareholders, and cutting the dividend would force all shareholders to reinvest. So we're very mindful that people are dependent on the cash dividends. And therefore, we wanted to make a choice that solved our strategic needs of having more flexibility but, at the same time, not forcing a cut on anybody. If people want to put some money in, it's voluntary. And we actually were very pleased with the take-up that we had. It was probably slightly above because it came late, and it was probably above our expectations on what people would do shortly. Brett, do you have any further comments on just the philosophical view of cutting the dividend versus maintaining it in a DRP?

No. I think you've covered that well. I would just add that, look, the retention of capital does clearly give some extra flexibility. And it's not just around considering opportunities around existing investments like Guzman, as you've mentioned, clearly. We do see, and indeed, are engaged in thinking in some discussions around our core asset management business in that we can think about other avenues, other product areas or other parts of the landscape that we can consider. And having the ability to do that, people might look at our balance sheet and see the investments in funds and those sorts of things that are there, it's not quite as simple as just dipping into those, of course, because there are regulatory requirements. But more importantly, for our Board and as Hamish mentioned, having a fortress-like balance sheet, we think, is extremely important for our clients around that. We need some way to make sure that if there was any problems or any mistakes or any of those sorts of things, that we would immediately be able to write a check to our clients. And so we have to balance all those things out across that. And that's basically resulting in just, I agree with you, Hamish, what is a very modest retention of capital through the DRP.

And Brett, I would add, we're in a very privileged position that -- for somehow, I don't know how it happened, our phones ring at Magellan. And every now and then, Brett or I would get a call, I'll often refer them back to Brett, suggesting an idea or suggesting something that we may want to invest in or buy. We've done very few things. What you don't want to do is finally get one of those phone calls and something that is mouthwatering and really interesting and then suddenly say, "Well, you have no money." And at the time you get the call, going, "Well, I really don't want to have to raise money at that time because the timing is not good." So having strength and flexibility in a business which -- our phone rings. We don't act on very many of the phone calls, but the phone rings. And if you're in a business and your phone rings and people are offering you opportunities, and every now and then one of them looks really interesting for our shareholders and can add a lot of value, we just want to make sure we're in a position that we can act. And it's not because we've got any desire to do things. It's just we've only got a desire to make our shareholders money. And at the end of the day, it's often -- having the flexibility gives you more opportunity. And the Board feels strongly and we feel strongly on that, that it's very sensible for shareholders to maintain a strong balance sheet with flexibility.

And just following on capital management. Does the company have any plans to conduct a rights issue?

No, it doesn't. We got cash. We have -- we don't need to undertake a rights issue.

Thank you, Hamish. We move on to a question we received around your China investments in the asset management business. Are you able to provide an update on the rationale for these holdings? And I will just combine this with a question that's being received online, who watched your webinar last week and wanted to touch on the risk of Taiwan.

Yes. So it's all interrelated, this question. I encourage people who are really interested on China maybe to watch that webinar. We did touch on that. The question is why are we interested in China to start with. At the end of the day, we're interested in areas of the world that have structural growth where we can invest in areas. We're very interested in cloud computing. We've been big investors in what we call a cashless society, Visa or Mastercard; the digitalization of advertising, Facebook and Alphabet; the digitalization of business enterprise in the world, you have SAP and Microsoft; the rollout of stores, and we have investments like at Starbucks; the digitalization of the incredibly inefficient mortgage industry in the United States through our investment in Intercontinental Exchange. These are decade-plus opportunities. The China story is actually quite simple, is that Chinese consumption per head or what is known as gross domestic product per head runs at USD 14,000 or USD 15,000. Sitting here in Australia, we run at around $55,000. And so does the United States, and so does Great Britain, so does Japan and other Singapore or other Western countries run it per head multiple consumption or income numbers that China does. Most of our GDP or national income, 70% of it is what we all as individuals consume. And what I would say in our societies is most of us, once you're over a fairly modest income hurdle, are saturated in consumption occasions. We all own hair dryers. We've all got 3 pairs of sneakers. We've all got 4 pairs of jeans. We've all got a cap. We've all got -- we've all -- all the houses have dishwashers. Most of them have air conditioners and so forth. And when you look at China, they have the same desires, but there's 600 million people who don't have any of these goods or services at the moment, and they will get these services as their incomes rise. So there's a natural unmet consumption desire sitting inside China. So if our consumption is growing per -- on average per head in the Western world at 4% per annum, it's inevitable that China's consumption per head is going to grow at multiples of that. And we are very interested in structural areas that can grow at multiples of what the world's growth can grow at. And the consumption side of China is the area the whole government policy is pointed at. They're trying to move away from a sort of export-led and an infrastructure and a fixed asset sort of property-led economy into a consumption economy, and we want to play into that. China is complex, both with, let's call it, the Taiwanese risk. The Taiwanese risk is a very good question. We started out in China by owning businesses like Yum! Brands. It has the fabulous KFC business. In China, we made 7 to 10x our investors' money through owning Yum!, and a lot of it was about their China story 14 years ago. We had a large position in Starbucks that has 6,000 restaurants in China with an opportunity of 20,000 or 30,000 restaurants in China. We own Louis Vuitton, and we've owned Estee Lauder, and we could own other businesses like Nike and others that all have fabulous Chinese businesses that play on this consumption desire of the Chinese. The problem is, is they're all Western brands. And if China invades Taiwan and the U.S. responds and the West responds having a whole portfolio of trying to play on consumption, particularly in U.S.-branded goods, may not be the world's smartest decision. So we monitor that, and we try and manage how much we would take of the China risks within China brands. And then we wanted to diversify that, and we ended up in Alibaba and Tencent because we think we actually understand technology platform companies well. Of course, the crackdown in China on technology and regulation and the stand after Jack Ma made those comments, it's been painful for us. It's actually -- 30% of why we underperformed the market was because of those 2 investments. I disclosed to our shareholders, we're out of Tencent, and we still hold Alibaba, and we still hold LVMH, and we still hold Starbucks. We haven't lost our nerve on China. And we don't want to throw the baby out with the bathwater. Tencent is socially contentious because it offers a gaming and social media platform. And we've learned from a communist party, in socially contentious areas, they can get to extreme outcomes of almost banning them. Alibaba is not a socially contentious business. It's a powerful business. It's getting regulated. But we own an investment in many tech companies that are powerful and getting regulated. That doesn't scare us off. We just want to make sure we can take it into account. So notwithstanding the volatility in the short term, we still think having an exposure to the long-term Chinese consumption side is important. You need to diversify the risk. You do not want to bear too much Taiwanese risk. You don't want to bear too much technology risk. You don't want to bear too much total China risk in your portfolio just because we've had volatility in the last year. And I'd note, even though we sold out at Tencent, we made our investors' money in Tencent. So we haven't lost any money. We made heaps of money in LVMH and Starbucks. Alibaba, we're kind of at breakeven at the moment. But we don't put China as uninvestable here. But you need to be careful and thoughtful. And we have a broad range of consultants who are giving us a lot of advice on aspects of risk in China. But it's not easy. It's a very, very complex area. And the added question around Taiwan was a very good sort of addition into that question. But I encourage people to maybe listen to the webinar where we'll probably discuss this in some more detail as well.

Thank you, Hamish. The next question comes from [ Elizabeth ] [indiscernible] with the Australian Shareholders' Association. Did Magellan make any political donations in the last year?

The simple answer is no. And the second answer to that is we never have made a political donation in any year.

Thank you, Hamish. And just a follow-up question from the Australian Shareholders' Association. How soon does Magellan expect to recoup the FY '21 losses from the investment in Barrenjoey Capital Partners?

Well, given Brett is responsible for Barrenjoey, I'll let him answer that question.

Well, look, clearly, as we've touched upon, Barrenjoey, in isolation, it was profitable in the first quarter, and as Hamish pointed out and as I've tried to point people to, equity accounting and such, that we account for those start-up costs within Barrenjoey in our profit and loss. But they're, of course, noncash. The investment has been made. That's a reflection of the -- our share of those losses. Barrenjoey, as I said, is currently in the first 3 months profitable. So we have a positive share of that, which is that plus the contribution from Guzman y Gomez and FinClear, of course, means that the profit and loss for the first quarter in the associates line is positive as I've said. I'd note, and again, we're -- if we put a rope right around Magellan Capital Partners, as I noted in there, our $23 million investment in FinClear, if you were to mark that to market, which is not what happens in equity accounting, but if you mark that to the latest capital raise, of course, as I mentioned, that was done at about 3x our initial purchase. If you wanted to, you could consider that to be a coverage of those initial start-up costs at Barrenjoey. So...

I think it's a very important point, Brett. FinClear, which was our smallest investment, has on a mark-to-market basis, already gone up at least as much in value as the total first year sort of noncash losses we had in the whole of periods, which was really the start-up of Barrenjoey, which is now profitable. We are highly confident around the investments we have in Magellan Capital Partners. We understand why there was a sticker shock with that sort of accounting number in the first period. It was a noncash item. But we think clearly, between what's going on, that the value of what we have there is above what we've invested, including -- I said that before, we have a high conviction in that statement and already the one move in FinClear is more than the total sort of start-up costs of the whole of Barrenjoey, which now in aggregate are profitable, and Barrenjoey is profitable there. So hopefully, that gives some people with some more context. We are pretty relaxed about that. We were, at the time, and we're even more relaxed about that initial accounting entry that we had at the end of last year, but we understand the sticker shock where some people may not have fully understood it or may have wanted to wait for some time to make judgment over time. And there's going to be a lot more information, we will say, in the years ahead. It's currently -- in the scheme of things, it isn't that material to Magellan. It's interesting, the share price -- the maximum we could have ever lost was maybe $300 million. But we invested -- the share price reaction was multiples of what we ever put into all these investments, which we could never lose more than we invested. And I think there's no chance we're not going to make money on these investments over time. But we've probably said enough. Hopefully, we've given people more information. And we're very happy to be judged over time. As we say, in the short term, the market is a voting machine. In the long term, it's a weighing machine. And we're very happy to be judged over time of how those investments work out. But we're pretty happy with how things are going at the moment.

Thank you. That's all for the questions that we pre-received. We now move to the questions that we've received during the meeting. And just on the topic of Barrenjoey, the next question comes from shareholder, [ Myles Cody. ] The question is, where do you see the future of Barrenjoey in 7 to 10 years' time? Is it the next Macquarie? Or will its ambitions be more limited to only serving Australian clients within limited product set?

Brett, why don't -- you sit on the Board. You probably get more insight to that than I ever do.

Look, the answer to that is that this is an ambitious business. But of course, it needs to start where it's -- thinks it's got its best prospects. And so it's very, very focused on what it's doing. As I said, I made the point in my address, I guess, that it does have an unconstrained business model, a business mandate, I should say. They just focused on those 4 areas I mentioned. But over time, of course, businesses grow, and it is unconstrained about its locations that it can consider and the types of businesses. And it can look at things like -- and you're pointing towards things that Macquarie might be doing in terms of asset management-type frameworks. It of course, can consider those. So let's see where it evolves to over time. They've got no set plans at the moment, of course. They're focused on getting their current business lines up and going and serving their clients, which is tremendous to see. But we'll see where that grows over time.

And the other point I'd add is we're not running it. So we can't really speak on behalf of what those executives are going to do over time. But we know we've partnered with some of the most talented people in the Australian market. And I think the shareholders are very, very privileged to have a 40% nondilutive interest in a business, which is run by some of the most smartest and talented people in the country, and they've come from all over the place. The model of having a sort of partnership that's locally controlled and controlled by the executives with global sort of firepower has just resonated with -- all over the place. And frankly, there's agility, I understand, in the market from -- of looking at how many of the good people have gone there.

Thank you. And we will just keep on the theme for Barrenjoey. The next question comes from shareholder, [ Aston Aronson. ] The question is, is the company not concerned Barrenjoey will be unable to steal market share from competitors with strong brands such as the large U.S. investment banks and Macquarie Group. What competitive advantages does Barrenjoey have compared to competitors?

Well, let me jump in there. Well, we're already seeing that. And I think Hamish just touched on it, and I tried to touch on it. Look, this business does aggregate around its people, the relationships that they bring and how that's been serviced over a number of years. But of course, it also is a function on how the firm can execute, in particular, the global connectivity. And so yes, whilst you're pointing out that there are global investment banks who have offices here, one of the attractions that Hamish just touched on and I tried to touch on in the speech is that the local autonomy, and we've seen this over the years with investment banks, if you think back to BT and others, and particularly Macquarie, frankly. The local autonomy becomes extremely important in attracting and retaining people. The key to this, though, also is to also have global connectivity. And again, I touched on this in the address. The partnership that's developing with a founder -- another founder, Barclays PLC, is very, very important and is extremely impressive with that. So we bring -- we, Barrenjoey, brings a great deal of firepower to the marketplace. And I think we're already seeing that across how the business is evolving in just those really, a couple of business lines that are up and going. So I think the combination of those things -- yes, it's competitive, of course. Yes, there are alternatives. Yes, there are connected competitors and alternatives there. But Barrenjoey offers a very compelling alternative, and we're seeing that play out now very quickly.

And Brett, I'd add to this. You see there's lots of the big foreign investment banks who have tried to come to the shores of Australia with massive balance sheet being -- outside a few of them, most of them have failed. Obviously, there are a few who have done very well. Macquarie Bank is a fabulous business, but what advantages did Macquarie had in sort of taking on the world? The advantage it had, it was talent and the business model. And I can tell you, Barrenjoey has extraordinary talent. And anyone who knows anything of detail about the investment banking industry in Australia -- and they look across their various business lines, whether it's in the equities business or the corporate finance business or the equity capital markets business and now in their fixed income business. They simply have, pound for pound, some of the very best people in the business. And even if you look at part of the equities market that is known as the block trading market where a lot of the volume is done, not electronic trading, where there's no money. But block trading where actually the commissions are paid. Since they've launched, I think Barrenjoey has already captured 50% of the Australian market, and that's where most of the money is earned, in the equities business. So from a standing start, to capture 50% of the -- or probably a big chunk of the profit pool in equities trading, of course, equity is bigger than that. It's equity capital markets. But they did the largest IPO in the Australian market in the last 12 months. I think they're #3 in M&A or already in the market. And the -- and what I hear, the amount of institutional investors and corporate investors who are signing up to do business with them, it's because of the people. It's the people that have been attracted here. And it's come -- this business hasn't -- didn't have a brand. This brand was made up by the executives, but already, with no advertising or anything else, it's kind of the talk of corporate Australia for some -- from a brand that never existed 12 months or so ago. And it's because of the people. It's not because of Magellan. It's because -- and it's not because of Barclays. Barclays is a huge global bank that bought Lehman Brothers. Barclays -- and they knew it. They could not have built this business in Australia because they could have never got the talent. And it's the model and the people. And it's not us, it's not Magellan, certainly not me. Maybe slightly Brett, he sits on the Board. But the talent of the people -- and it's not 1 or 2 people. It is broad-based, the people who have flocked to join it. And if you have capital, global connectivity that you then have extraordinarily talented people concentrated in a firm, the chance of not doing well, I think, is fairly low. And I know it's very hard for shareholders to see it on the outside. But I know our institutional shareholders who understand the equity business. They just should ask themselves the question, who's at Barrenjoey? And they know them all. They know who these people are and the grouping that they've got in the equities business is extraordinary. Corporate Australia know the corporate finance business. The grouping of executives they have there is extraordinary. The Chairman is David Gonski of the business. The Chairman of BHP is setting up his business. Ken MacKenzie, when he leaves, he's setting up his business at Barrenjoey. It's probably got some of the most talented corporate finance executives who have been in this market in 20 years. The equity business is just rich with the most talented people who have operated in this business in the last 15 years. Their fixed income business is not even up and running. It is run by a super talented team of individuals. So I think it's just talent, talent, talent. I hear on why this business can be competitive against world players. And maybe Brett and I know something about the business. But when we look at the people and we get told -- and I'm not even on the Board or anything, but I ask people around the market when I run into them, "What do you think?" And they're just telling me people I haven't even heard of who have joined this company, and they tell me about these people. And this isn't a 1- or 2-man show. This is just rich in talent. And -- but let's see how it goes over time. But when you have capital and global connectivity and extremely talented people who are convalescing in one area, you may get some good results. So let's wait to see what these people can achieve. But if they achieve it, we will be happy cheerleaders. It's not Magellan who's doing this. It's some very, very talented, hardworking executives. And I hope in the future that shareholders can applaud these people for what they may be -- we got a 40% nondilutive interest here. So we may have to send over some cakes and champagne and things from time to time in order to encourage these people to keep getting up early and working incredibly hard. But I know that the vibe, when I'm speaking to a few people, and I'm not really involved, but the few people I've spoken to tell me they get to work and they love it every day, and they love the freedom they're getting compared to when they're working in some of these global shops. It's a different -- it's just a different formula that they're being offered.

Yes. The other thing I would throw in there, which is perhaps a second [ order ] thing is that remember, they're starting with a blank sheet of paper from a systems point of view. And you might say, "Well, the investment banks, the global investment banks have got large in-house systems." The world has actually moved on quite significantly. You've now got the ability to look at Software as a Service type providers in all this. And it provides much more flexibility and, indeed, less legacy that you have to deal with and what's happening. And I consider that starting to turn up already, in my view. I saw this very early on in my career when Credit Suisse financial products was first started effectively with brand-new systems. It gave them a very, very incredible edge around what they were doing at that time. So the idea that it's hard to compete against, let's say, legacy or large systems within some of these banks is not true anymore. And it's not as they have to build from scratch all these things. There is a lot of services now available in a very, very efficient way that can be done. So I think the combination of all those things that we've just spoken about gives Barrenjoey a very, very good chance of gaining meaningful market share in that revenue pool that I discussed in the address.

Thank you both. Another question from [ Aston Aronson ] this time on Guzman y Gomez. What thoughts does Hamish have on Guzman y Gomez' ability to compete in the U.S. and globally against competitors with strong developed brands such as Taco Bell and Chipotle? Are we concerned these competitors make the U.S. market too difficult?

Yes. I don't want to get ahead of ourselves. Obviously, we understand that business, and Brian Niccol, who runs Chipotle, is a fabulous competitor, and they're going to be hard to compete against. And of course, we know the Yum! people incredibly well. David Gibbs, I know well. I did a podcast with him. They own KFC, and they own Taco Bell. They're formidable competitors. The real opportunity of why we bought into Guzman y Gomez is expanding the 138 stores into at least 450 stores in Australia, if not more. The unit economics are incredible at Guzman in Australia. If they simply roll out that over the next decade or whatever it is and roll out those stores with those economics, we're going to make shareholders an enormous amount of money over time, as that happens. They've got a business in -- at the moment, which show it could work in Japan and Singapore. They're not that large, those markets in a way aren't that large. The U.S. market is absolutely enormous. We've introduced them to a few people in that market. They've got a few pilot stores operating. So I would say that it's more the venture end of that. If they can crack the market, and there is actually an opportunity in that sort of casual dining space. Taco Bell operates in a slightly different segment of the market. Chipotle is certainly not saturated in markets. I actually think the food is better at Guzman. It's got a different brand edge that we've spoken to, very different to what the -- especially the younger consumers, it feels very, very different. Chipotle is quite [ stayed. ] But I'm not about to say it's easy and not that we're doing it. But if they can find the right formula in the United States, that's called sort of the cherry on the icing on the cake. The Australian opportunity is so enormous. I think the team is so focused on that. Craig sits on the Board. The U.S., if they cracked it, just shows the optionality that Guzman y Gomez could have if they could crack that market. But I don't want to -- it is -- you're right that Chipotle and Taco Bell are formidable competitors. It's a very, very competitive market. But if you get the formula right and you actually get some franchisees and others with the right unit economics in a concept that works, the riches in that market can be enormous. But of course, it's competitive. But that's not why we went in the business. We largely went in the business because of the Australian rollout story where we see the unit economics and we see the customer data, and we just feel so confident that the rollout is just going to create enormous shareholder value. If the U.S. sort of comes off, you won't have to worry about much more at Magellan in the future if that was to occur. But let's -- it is so early days, it is so early days. Steven Marks, who runs it, is super excited. He's yanking himself. He'd love to do it. He's speaking to lots of good people over there. But it's so early days in what they're doing in the U.S., and it's not really the investment case of why we went into Guzman y Gomez. It was about the Australian story that I think has already proven there, and all they need to do is get these stores in front of customers ultimately in Australia. This is a space we understand incredibly well, including the complexities of the U.S. side of the business. But they're not going to go out. Guy Russo, who's the Chairman of that company, who actually used to run McDonald's and then ran the whole turnaround of Kmart. He's probably one of the most talented executives this country's seen in 15 years. He's going to, with management, get it right. We don't -- we're kind of again spectators here at Guzman. I don't want to underplay Craig's role here because I know he's on the Board. But this has got some super talented McDonald's and management all over this, and they will make the right decisions in relation the Australian rollout, and they will make some cautious steps around the U.S., and we'll be interested to see how it goes.

Thank you, Hamish. The next question comes from [ Oli Bell Capital. ] The question is would love to know if the team sees the opportunity to continue to increase its ownership stake in the current Magellan Capital Partners businesses, specifically FinClear and GYG, into the future. Is this part of the strategy into the future?

Yes. I think I answered that before. I'll let Brett speak about FinClear. In relation to GYG, we would have taken a higher stake at the price we paid, just not anyone -- no one else wanted to sell any more shares. We actually offered to buy a higher stake in the company when we went in, and we would have spent more money. But at the price we offered, there weren't enough sellers. They may have told you something about that. But if shares are offered in the future at prices we think are sensible for our view of the future value, I would love to own more of Guzman y Gomez. I'm not giving anything away to Guzman there. I think they know that as well. But it will depend. We're not in control of when people want to sell nor the price at which they want to sell. And therefore, we'll just have to see it from time to time. But would I like to own more Guzman y Gomez on sensible terms? I would do it with my ears pinned back. But it would have to be on sensible terms. And last time around we asked them more, no one wanted to sell any more shares, which says there's a lot of other people who believe in this business as well. But from time to time, people for their own reasons, they want to sell down some, and we will look at it. If it's sensible, we're probably a buyer. But if people want too much money, we're not a buyer at the end of the day. FinClear, Brett?

Look, I think -- look, we're very happy with the level of ownership, the percentage level of ownership that we have. It's a slightly different combination of facts, obviously. The -- we're very -- obviously very, very happy with the way that the business, as I explained, has evolved. We are also there with one eye on the -- on some of the advantages that their network might bring in terms of thinking about some of the things that we could bring to our investors in the -- in our funds and various asset management products that we have. We've maintained our percentage ownership in FinClear. And as I noted, it is likely FinClear will IPO next year. So we're very comfortable where we currently sit.

And I would say, Brett, on that point. I think it's likely in the next few years, both FinClear and Guzman will IPO. At that point, there will be a market value on that, and there'll be a lot of public information around those companies available for people. I'm not sure Barrenjoey is about to IPO in the near to medium term, but those others will IPO. And I suspect there will be a lot of people who will have a very, very close look at those businesses at that time. And hopefully, people may see what we see at that time. But certainly, there'll be a transparent market valuation on those businesses for our shareholders.

And moving on from Magellan Capital Partners. The next question comes from shareholder, [ Kevin Daly. ] Brett, maybe one for yourself, what advantages does FuturePay have over [ challenger ] sale annuities?

Yes. Look, it's a very good question, and it's -- there's a lot in this, obviously. So I'll try and simplify it to some degree. The big problem here, I think, that's evolving here and around the world is that the old defined benefit days clearly are gone. It's largely defined contribution here. It's happening around the world. And in the old defined benefit days, of course -- the problem that I described in that speech was somebody else's problem, it was your -- it's the government or the company perhaps that's providing your pension. That's deliberately been flipped around now. The point I was trying to make is it's now your problem in this, that you have to deal with it. You can then try and find someone else to take the problem off your hands. And one of the ways that you could do that is to hand it back to an insurance company or a regulated entity in that way, who will then effectively guarantee you an outcome on that. The problem is that -- and one of the reasons that defined benefit is no longer is that in many respects, what was being offered and what was being guaranteed was too much. It was incorrectly priced, and that's why a lot of the problem was sent back to the user through defined contribution. And as you turn around and try and find someone to take the problem off your hands again, it becomes apparent that the real price of that's worth because to fully guarantee under a life company structure requires capital, a lot of capital. And so therefore, the rates of return that you can offer and the flexibility of withdrawal of your capital tends to be quite low. And therefore, under that utility framework I discussed in the speech, you tend to add less utility to that versus something like a fund where you do have daily access to that. And so when you think through what I described in FuturePay, FuturePay has reserves available to it but around that 3-year mark, not infinite -- not 0 and not 5 or 10. We could run those reserves out for 5 or 10 years, but the value proposition would start to go down. And so in our mind -- or at least in my mind, what this is doing is actually pointing to a solution, which is kind of rationally sitting in the middle between someone taking the problem fully off your hands in a guaranteed sense, and fully leaving it with you where you've got no reserves effectively to help you through periods of market turbulence. So to us and to me, I think it does marry up. And when we look at it, as I said, through the lens of the entire utility, the overall benefit, including access to your capital, the rates of return and the growth aspects that you need to help offset the fact that you just don't know how long you'd live for, we see a maximum point in the middle there somewhere, which is what FuturePay is designed to do. So it is different. It does attack it differently, and we think it does add significant utility to people in the -- amongst their choices. I'm not saying everyone puts their entire amount of money into something like FuturePay. But it does add a very high -- in our view, high utility building block that people then can consider.

Sarah, could I just maybe suggest that maybe we just pause on questions at this point. We're 1 hour 46 into the meeting. I think it's very -- happy to come back to questions if there are more questions, but there's some important shareholder matters to be considered. I'd like to make sure that we give the opportunity for the shareholders to be here to consider the formal resolutions because it's important that we're a democracy here. We don't want to run questions and then people have to leave and not get an opportunity to vote. So maybe if we could turn to the formal matters of businesses and other questions on the formal matters of business. And then at the end, if there are outstanding questions, maybe we could take it if people want to hang around. But I don't want to kind of feel that people were running so much that people never got the opportunity because they have to do things to go and vote. We don't want to cut people off, but I think it's very important that our shareholders get the opportunity to vote on the resolutions that are coming up as well, if you're happy to do that. Remember, I can't see how many more questions so I don't know. But I just figure people may accuse me of chairing a very poor meeting if we -- if I don't actually step in as Chair and make sure we actually run the meeting here and then come back. Brett and I, of course, are happy to answer questions, but I think it's very important that we give shareholders the opportunity on the formal part of the business to vote as well.

Absolutely. Happy to move to the formal business. There are a number of questions that we can address at the end.

Okay. Well, thank you very much. I'm now going to turn to the formal part of the business. I'm advised by the company's secretaries that the holders of approximately 87.7 million of the company's ordinary shares have sent in proxies. In my capacity as Chairman of the company, I've been appointed as a proxy by the holders of between 64.1 million and 87.4 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 to be put before 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'm not sure how people do this virtually, I will announce the proxy voting results after the vote is taken for each resolution. That is what we've done when we've had physical meetings, just to let people know. The proxy voting figures will be as at the closing time for receipt of proxies, which was at 11 a.m. on Tuesday, the 19th of October 2021. These figures may change if a shareholder who submitted a proxy has attended the meeting today and revoked their proxy. The constitution of the company, together with the Corporations Act, provide that a resolution put to the vote at a meeting shall be decided on a show of hands unless a poll is demanded. A poll can be demanded by the Chairman. As a Chairman, I'm required that each of today's resolutions be decided by a poll. I would suggest you a show of hands might be very difficult in this virtual world. The instructions to complete your vote now appear on the screen. I declare that the polls are open and that resolutions and voting choices now appear on the Lumi AGM portal. Shareholders and proxy voters -- proxy holders who have lodged -- who have logged into the Lumi AGM portal using their unique login details will have access to the resolutions and the voting choices. You will need to submit your voting choice in order for your vote to be counted. Shareholders who wish to vote in favor of the resolution, please mark the for box. Shareholders who wish to vote against the resolution, mark the against box. Shareholders who wish to abstain from voting on the resolution should mark the abstain box. I may have said abstain against -- about the against box. Absentations will be counted in computing the required majority for the poll. If you are 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 if you vote again on the Lumi platform. Please note, there is no button to submit or send your vote. Your selection will be automatically recorded once you have marked your vote. If you change your mind and wish to change your vote, you can modify your vote at any time before the polls are closed. I appoint David Parkinson from BoardRoom Pty Limited as the returning officer. The returning officer will arrange for the counting of 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 all the polls will be released to the ASX later today. They will also be posted to Magellan's website. I now propose to proceed with the items of business, which was set out in the notice of meeting. The first item is receipt of the company's financial reports. The first item of business deals with the financial statements and reports for the year ending 30 June 2021, including the directors' reports and the auditor's reports and have been tabled. Please submit a question through the Lumi platform if you have a question regarding the company's financial statements and reports for the year ended 30 June 2021. No resolution is required on this agenda item, and no written questions solely of the company's auditors have been received from shareholders. Again, now is the opportunity, if anyone present has any questions or comments relating to the financial statements of the company and the report of the directors and auditors. So Sarah, I will ask you maybe to give a moment or 2 to see if we've received any questions from shareholders or proxy holders for the item.

Thank you, Hamish. No questions have been received in relation to this item.

Okay. Well, thank you very much. Let's turn to the resolutions that require shareholders' approval and voting. The first is the adoption of the remuneration report. The first resolution concerns the adoption of the company's remuneration report. This report forms part of the director's report, which is contained in the company's annual report. The resolution you'll be voting on now appears on the screen. Unless I hear to the contrary, I'll also take the resolution as read. I now move to consider item 2, adoption of the remuneration report as contained in the notice of meeting and as it appears on the screen. Please submit a question if you have any questions or comments regarding the remuneration report. The Corporations Act requires that a resolution that the remuneration report be adopted must be put to the vote at the company's annual general meeting. I point out that the vote on this resolution is advisory only and does not bind the directors of the company. Before putting the motion, I'd like to invite any questions or comments on the remuneration report. [Operator Instructions] Again, Sarah, I'll give a few moments to ask if we've received any questions from shareholders or proxy holders in relation to the remuneration report.

Thank you, Hamish. There were a number of questions in relation to this item received in advance. Can you please explain Magellan's executive remuneration framework and how remuneration decisions were made for the 2021 financial year, particularly in the context of the recent share price performance?

Yes. Well, I think people need to understand that we reward our executives. And I may ask our Deputy Chairman, Hamish McLennan, to step in relation to maybe my remuneration after I make a few comments. Each executive is remunerated on things that they are accountable and responsible for. Very few shareholders are actually responsible for what happens to the share price on a day-to-day basis, but they are accountable for matters like risk and compliance and employee retention, client-related, risk matters that may come up in the business. And we have very clear sort of KPIs. We set them out for our key executives of what has been achieved in the year, and we pay them bonuses in accordance with the achievement of tangible achievements that we think the executives are actually responsible for. We also have material shareholder alignment by executives that over 80% of our executives are shareholders. So let me tell you, in the last period, our shareholders -- our employees have felt the pain that the share price has gone down. I personally have a reasonable amount of money in Magellan as in the vast majority of my net worth and I've never sold a share. And let me tell you, I realize the share price has gone down as well in the last period there. So we don't -- people are aligned. Our employees are aligned in terms of shareholders as owners of the company, but their individual remuneration actually pays them for things that they're in control of. And by paying them -- and we think that is the right way to pay people. And I know this probably crosses over, I can say Brett's remuneration is very clear. He delivered a huge amount of projects during the year, and I think he's been very fairly rewarded for that. And again, Brett is a very large shareholder. And maybe Hamish McLennan, you may -- I'm kind of at the pointy end of this. Maybe you want to make a few comments on behalf of the Board maybe in relation to my remuneration in the context of the share price falling. After the results, by the way.

And look, just specifically, I think you've set the framework up really well. A large part of the focus for your remuneration is tied to the asset management business, has been covered off before. I mean over the last 12 months, before performance fees, the profits are up 10%. And so if you look at funds under management, there are -- that's a very robust business. I think you, in particular, have been committed for the long term. I think it's pleasing to see the way you've articulated all the innovation that we're focused on around Magellan, and we look at your commitment and focus to the company over the last 3 years. You haven't had a pay raise yourself over the last 3 years. And I would also just note for all shareholders, you're entitled to a $5 million bonus last year, and you voluntarily, along with Brett, saw that you were uncomfortable taking a bonus in the bizarre environment that we were living through last year. And so that wasn't taken. And so we've looked at your remuneration, we want you committed for the long term, and the Board absolutely supports all of your endeavors and what you're doing, and we think that's appropriate, based on where we're at, at the moment, to have you incentivized over the long term. And I will note, specifically with your remuneration, once this goes through, if it goes through, that you won't have another pay review for another 5 years.

Thank you, Hamish. Sarah, are there any other questions before we turn to the voting on that -- on the remuneration report?

No further questions.

Okay. We'll now proceed with voting. As Chairman, I exercise my power to direct the vote on item 2 be taken by way of a poll. As set out in the notice of meeting and subject to voting exclusions, I will vote all undirected proxies in favor of this resolution. I'm allowing just some time for the shareholders to record your votes, if you haven't recorded your votes. I will now have the Chairman's votes recorded as well. [Voting]

The proxy voting results for this resolution, we'll now put on the screen. Obviously, the final tally of all the votes from the poll will be released on our website and also at the ASX later today. I'm now moving to item 3. This is actually quite a personal one. This is the reelection of myself as a director of the company here. And as it relates to me, I'm going to hand to Hamish McLennan to address this resolution.

Good. Thank you, Hamish, better I take it. So item 3a concerns the reelection of Hamish Douglass to the Board. By now, you will have had an opportunity to read the explanatory notes that accompany the notice of meeting. The explanatory notes provide a brief biography of Hamish. [Operator Instructions] Hamish was first appointed to the Board in November 2006 and was last reelected as a director at the company's annual general meeting in October 2019. He retires in accordance with the company's constitution and ASX Listing Rule 14.4 and being eligible, offers himself for reelection. The Board, excluding Hamish, unanimously supports Mr. Douglass' reelection. I will now provide Hamish the opportunity to address the meeting regardless of his reelection. Do you want to just say a few more words, Hamish?

Yes. I'm happy -- I won't speak for too long. I hope people have heard -- are probably sick of hearing me speak today. I've been at Magellan as one of the co-founders with Chris Mackay since we founded the firm in late 2006. This has been my life since. Since that time, I'm completely committed to the business and to the team and to our clients. I'm committed through the good and the bad here. And I'm in it for the long term. We're slightly unusual at Magellan, but I'm the Executive Chair of Magellan. We have a Chief Executive and an Executive Chair. I can assure you that we have incredible amount of independence here. We have a Deputy Chairman in Hamish McLennan, and our main asset management business has a fully independent Chairman in Rob Fraser. We think the governance was slightly unusual, having an Executive Chairman. We think it's appropriate. I think Brett and I both bring different skills to the business. We work very well together. We kind of run different things in the business. But I would be honored to be reelected as a director. Again, Magellan is my passion and my life. I do a few other things in life as well. But in terms of the vast majority of my day and my time, it's taken up with thinking every day about Magellan. I would be honored if the shareholders would consider me for reelection to the Board.

Thank you, Hamish. The precise resolution you will now be voting on appears on the screen. Unless I hear to the contrary, I will also take the resolution as read. I now move to consider item 3a, the reelection of Hamish Douglass to the Board as contained in the notice of meeting and as it appears on the screen. Before I put the motion to a vote, does anyone have any questions or comments about the resolution? [Operator Instructions] Are there any questions, Sarah?

No questions relating to this item.

Thank you very much. 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 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 3A. [Voting]

The proxy voting results for this resolution can now be seen on the screen. Very good, Hamish. I'll now hand it back to you.

Well, thank you very much, Hamish, and thank you to the shareholders who supported the resolution. I hope there's not a whole lot of people sitting out there who vote against it, but thank you very much for everyone who supported my reelection to the Board. I now want to move to item 3B, and it concerns the election of Colette Garnsey to the Board. By now, you've had the opportunity to read the explanatory notes that accompany the notice of meeting. The explanatory notes provide a brief biography of Colette. Please submit a question if you have any questions or comments regarding this resolution. Colette was appointed to the Board in November 2020. She retires in accordance with the company's constitution and ASX Listing Rule 14.4 and being eligible, offers herself for election. The Board of Directors, excluding Colette Garnsey, unanimously recommend you vote in favor of the election of Colette Garnsey. I now provide Colette the opportunity to address the meeting regarding her election.

Thank you, Hamish, and good afternoon all. My name is Colette Garnsey, and I was delighted to join the Board in November 2020. I'm a full-time nonexecutive director of both publicly listed and private companies, including Flight Centre Travel Group, Seven West Media, the Australian Wool Innovation Company and Laser Clinics Global. I've had many years of senior leadership experience with respected and successful public companies in Australia, including David Jones and Premier Investments, with a focus on driving performance in retail, marketing and media. I have an effective leadership style that allows me to work well within a team, bringing an independent mind to discussions and decisions, along with the Chairman, my fellow directors on the Board and with management. A core strength of mine is an appreciation for trends influencing consumers and how to translate them into meaningful strategies for business. I believe that fulfilling my responsibilities with integrity should remain a core skill of any director. Over many years, I've demonstrated my ability to apply commercial and financial acumen for the benefit of shareholders. Thank you very much for considering me.

Well, thank you, Colette. And I can say on behalf of the Board, we are absolutely delighted you've joined the Board. And so far, you have added tremendous value to all our discussions at a Board level, and we couldn't be happier. The precise resolution you'll be voting on now appears on the screen. Unless I hear contrary, I will be also taking the resolution as read. I now move to consider item 3b, the election of Colette Garnsey to the Board as contained in the notice of meeting and as it appears on the screen. Before I put the motion to a vote, does anyone have any questions or comments about this resolution? [Operator Instructions]

Hamish, no questions have been received in relation to this item.

Okay. Well, thank you very much, Sarah. We'll now proceed to voting. As Chairman, I exercise my power to direct the vote on item 3b is to be taken by way of a poll. As set out in the notice of meeting, I'll vote all undirected proxies in favor of this resolution. Please submit your vote in relation to item 3b. I'll just allow, again, a little bit of time for people to submit their votes. [Voting]

We can now put the proxy voting results for this resolution on the screen. Well, Colette, you did better than me. So congratulations. Congratulations on your appointment. I'm sure when the final numbers come through, that will be overwhelmingly in favor. The next 2 resolutions concern the issue of shares in the company to Colette Garnsey under the terms of the company's share purchase plan. The proposal relates to the issue of shares up to the value of $1,333,333 to Colette Garnsey and the provision of a full recourse, interest-free loan of up to $1 million, being 75% of the value of the maximum number of shares to be issued. By now, you would have the opportunity to read the explanatory notes that accompany the notice of meeting. The explanatory notes provide a summary of the proposal. As these resolutions are interrelated, I intend to deal with them concurrently. The Board of Directors, excluding Colette Garnsey, unanimously recommend you vote in favor of items 4a and 4b. The precise resolutions you'll be voting on now appear on the screen. Unless I hear to the contrary, I'll take the resolutions as read. I now move to consider items 4a and 4b as contained in the notice of meeting and as they appear on the screen. Before I put the motion to a vote, does anyone have any questions or comments about this resolution? [Operator Instructions]

Thank you, Hamish. We did receive a number of questions in advance of the meeting relating to this item and about the rationale behind the grant of the SPP. Perhaps it'd be useful to explain the rationale for the SPP, particularly in the context of the recent share price performance. And further, are all directors offered this SPP when they first joined the Board?

Yes. I think it's a very good question. I think the recent share price, and I know I'm inverting what the person is probably asking, the recent share price performance, I think, shows exactly why it's in the interest of shareholders to support this resolution. All of our directors have a material investment in Magellan. All of our directors are feeling the recent share price. And therefore, every decision, which we consider at the Board, the directors have a material stake at the table. This concept of being completely independent and having no investment in the company leads to the best outcomes for shareholders, we think, is nuts. So we want the directors to think about decisions. And if the share price goes down, we want the directors to feel it. I feel it, and all the directors can feel it. And I know that's not exactly what the question was asked, is why is Colette being issued shares when the share price was low. Many of our directors had their shares issued to them when they were $1, and there's been an enormous amount of shareholder creation since then. Some of our directors had them issued at a higher price, some at a lower price. We're not in control of the timing of the -- or what the share price is at the time they're issued. Every director who joins the Board as a nonexecutive director, from day 1, has been offered a loan up to $1 million to buy shares. What isn't understood about this often is people think we are giving the directors $1 million. We are not giving the directors $1 million. We are lending the directors $1 million. The value of that loan starts out -- if the interest commercially would be 3% a year on that, that's $30,000 of benefit we're offering that director, which goes down over time because we get to keep all the dividends. So the loan actually gets amortized over time. And I can tell you, our directors' salary plus the benefit they get from this loan is well below what other directors are paid. And they have a lot more at stake at Magellan than most directors have at other companies who don't have this plan. We know it's unusual that we would have an arrangement like this, but we fundamentally believe we are aligning the interest. And make no mistake, we are not giving the directors anything here. They are taking on the full risk of these shares. So if the share price goes down after they take out this loan, the director is on the hook ultimately at the end of the day for these shares. These aren't options. A lot of -- some companies issue their directors options. That's a one-directional bet. This is -- they get the upside and the downside here. It's been offered to all our directors. We're a very unusual company. We think we're -- everybody is aligned here. And even taking this loan into account, our directors get paid less than the vast majority of directors in Australia at comparable-sized companies. I shouldn't be saying that, our directors may want a pay raise here after hearing that. So we feel very strongly that it is aligned with our shareholders and our culture. It is unusual. We don't apologize for it being unusual. It doesn't fit in everybody's rules. But we wish more companies acted like we did and had more directors who are on the hook. And so if the share price goes down, the director should feel the pain. And I can tell you, our directors do feel the pain, just like the rest of you, shareholders, and want us to do things. And when we consider spending money, they really think about what the consequences of that is for shareholders. So I commend this to shareholders. But if there are any other questions, Sarah, I'll hand it back to you.

There is another question, Hamish, in relation to the director SPP, but broadly for the employee SPP, comes from Mr. [ Aston Aronson. ] In the Chairman's opinion, how great is the risk that the issuing of shares at significant discounts to the company's intrinsic value under the SPP could destroy shareholder value in excess of the benefits offered by the plan?

Yes. First of all is the market is the determinant of the share price at any time. You can make your judgment whether you think the shares are materially undervalued or overvalued at particular times. Anyone can buy shares on the market with that view. We have some windows that come up each year. The shares we're issuing in the context of a $6 billion or $7 billion company are very, very modest. So any of these shares being issued, people are paying. We're not giving them. We get full value to the market value at the time. To the extent that shares may be undervalued to people's views on intrinsic value at the time is incredibly immaterial. With the alignment of the interest for both employees participating and directors participating in this is -- I think, well outweighs this issue. I think they're going to get more motivated. And if they're viewing the share price is undervalued at the moment and they want to take up more shares, I think that's a pretty good signal to the rest of the shareholders. We don't know. We haven't been told yet which -- what employees are going to take up this year. But if they take up more, I would just say, I [ appreciate participating ] in the SPP this year. And they may be giving a view that they think it's a good time to buy. But I'm not going to express opinion whether I think our shares are underpriced or overpriced at any particular time. I will just give you the facts, and we'll let you make it up -- make the decision yourselves.

Thank you, Hamish. No further questions.

Okay. Thank you very much. I'll now proceed to voting. As Chairman, I exercise my power to direct that the vote on items 4a and 4B be taken by way of a poll. As set out in the notice of meeting, I'll vote all undirected proxies in voting -- in favor of items 4a and 4b. Please submit your vote in relation to items 4a and 4b. I think we'll just give people another few seconds before putting the proxies up. [Voting]

We may now put the proxies up on the screen. And the proxy votes can be seen on the screen. Everyone should now have had the opportunity to vote on all of the resolutions. Please ensure that you've completed submitting your voting choices as I will be declaring the polls closed. I will just give another 10 or 15 seconds before I declare them closed, just in case people are making their final choices and want to change decisions here. I now fully declare the polls closed for the vote on each of the resolution, and that concludes the voting on the resolutions of the meeting. So the votes cast will now be tallied. Having regard to the proxy and the number of votes on the floor today, it is expected that all the resolutions will be passed. The results of the voting will be released to the ASX later today and posted on Magellan's website. We're now at the formal end of the business. But I know Sarah, there may have been maybe 1 or 2 questions. I'm conscious we're 2 hours and 15 minutes, but it is the meeting of shareholders, and the shareholders are entitled to ask questions. So if there is a few questions that you feel have -- are different and haven't been covered, I'm very happy for Brett and I to take those questions. For shareholders to know, that all the formal business has now been conducted. So if you don't want to stay, if there are 1 or 2 extra questions, Brett and I will take those before formally closing the meeting.

Thank you, Hamish. There are a few more questions that relate to the business, with the remaining relating to the investment strategy. So I might just touch on the ones that relate to the business.

Thank you. Yes, I think we should get to the business of Magellan in these final questions.

So one of the questions comes from Mr. [ Gregory Baker. ] His question is, I'm interested in your long-term goals for Magellan. Do you see the business evolving into Australian Berkshire Hathaway?

Look, it's an interesting question. We would love to have the business that is incredibly robust, diverse and resilient in the long term. Brett and I, great fans of Berkshire. It's a different business model. It does not have an asset management business. It has an insurance business and, of course, out of insurance businesses, has made multiple business investments. I think Magellan Capital Partners is an interesting step for Magellan where we're an investment firm. We think we can make good judgments on investments. We want them connected to what we do. We want them to add a lot of value. So we're not going to predict we're going to be Berkshire Hathaway. We don't have an insurance business. It's a very different business model to Berkshire. But if we could make a number of investments and create a lot of shareholder value and make Magellan a much more robust and resilient business over time, and we sit here in 30 years, and we're a much larger business that's more diversified with some great interest in some other businesses, that would be it. But we don't have any grand plans in the next 10 years, we're going to do a certain number of investments or anything else. We are very focused on our asset management business. We are very focused on growing those other 5 product areas. I'm almost solely focused on the global equity strategy. Brett is looking at some other investments. So I'll let Brett be Warren Buffett, and I'll focus on my job as the Chief Investment Officer. But look, we're not going to be arrogant. We're not Berkshire Hathaway. Berkshire Hathaway is an incredible business. Warren Buffett is one of a kind. I'm not Warren Buffett. Brett's not Charlie Munger. But we will keep doing things that we think are sensible for the shareholders to keep -- to build a more resilient business over time and continue looking at adding material shareholder value over time. That's what drives us as the principles here.

Thank you, Hamish. This next question comes from Mr. [ Cameron McMillan. ] He says, thanks for the update. Could you please indicate any plans to close the discount in the Global Fund?

Yes. This is an interesting question. At the end of the day, we don't like anybody having a bad experience with anything that people do with any of our funds. We acted in the High Conviction Trust that we had, and we -- it was a closed-end trust, and we opened it into an Active ETF, and we've had very, very positive feedback around that. The Global Fund has 2 different units, if people aren't aware: it's got an open-class unit that trades at net asset value all the time; and then it's got a closed-class unit that unitholders trade amongst themselves. And from time to time, you can get a discount in a premium like any closed-end fund vehicle. We have got options that are issued over those closed-class units at the moment. Those options are very valuable to shareholders because they can subscribe at a 7.5% discount that Magellan will pay for. That complicates -- we can't simply do what we did in the High Conviction Trust that didn't have any options and simply open that up. That pathway isn't available to us. But over the long term, Brett and I want people to have a good experience. And if over the long term, the closed-class units aren't giving people a good experience, we're, of course, going to look at that, but it's not as straightforward. But the experience people get -- there are different markets, by the way, for open- and closed-class units, and some people really like closed-class units and the discounts that they can trade at and they've got a different trading environment. And there is a big market there, and there's some very valid reasons of having closed ones. But over time, if that's not something that ultimately people like and enjoying -- we've already demonstrated with the High Conviction Trust, we're prepared to do things. And we will not act in our short-term interest. We'll act in the interest of our unitholders. But the options make it a more complex equation. Brett, do you want to add anything there? Brett, you're on mute, I think.

Excuse me. No, I was just saying, look, no, in the interest of time, you've covered everything. There's nothing more to add.

Thank you.

Thank you. I think we just have 2 more questions. Very quickly, Mr. [ Kevin Daly ] asked around Magellan's Scope 1 and 2 emissions are only 122 tonnes. His house does 5 tonnes. His guess is that there's good business reasons that you've outsourced your emissions into Scope 3. Will you undertake to disclose your Scope 3 emissions next year?

Brett, maybe you can answer the Scope -- obviously, they're harder to measure because we have to get to all of our suppliers in our supply chain to actually understand their emissions. Scope 1 and Scope 2, we get good information. Scope 3 are there. But Scope 3 is a very, very important topic in understanding the whole value chain, and we are looking -- we're a very low-carbon-intensive business as a whole. But we're looking at this very closely. And Brett, maybe you want to add a few more comments because I know you're working on this with Dom, who heads up our ESG area as well for the group.

Yes. Look, I think, again, in the interest of time, I won't get into too much detail. I mean you hit the nail on the head, Hamish. We're a very low emitter, if you like, in that we are thinking about what to do on Scope 3. And look, we'll have some more to say on that, I think, possibly in the next annual report as we keep working on that. But look, as a firm, in Scope 1 and 2, we're a very low user, of course, because we're just largely people. And we've got a culture, I think we've said over the years, we make sure people print on both sides of the paper. We turn the lights off. We do all the things that we possibly can in a sustainable way. But the nature of our business, of course, is that we're a very low emitter. So we're working on the things that you're talking about, and we might have more to say on that perhaps in the next annual report.

And our supply chain is -- the Scope 3 are relatively light, but it's about getting proper measurement on it. But our supply chain is pretty low intensity as well, if you think about the nature of our business. But getting accurate reading on their emissions to give you the accurate number is always the challenge, but it's a super good question. And it's actually for the industry as a whole moving away from -- often, company are just moving stuff from out of Scope 1 and Scope 2 into Scope 3 by selling the emissions to somebody else but still consuming them and then pretending they don't have any carbon in their business anymore. And just passing the buck around doesn't actually solve the problem. So it's a very insightful and important question. It's not that material for us, but for a wider context, it's a very important question. So we support it.

Thank you, Hamish and Brett. Just one final question. As I mentioned, the rest relate to the investment strategy side. This one comes from [ Simon ] [indiscernible], given Magellan has decided to retain some earnings and direct them towards Magellan Capital Partners, would Magellan ever consider instead directing the retained earnings towards buying MFG shares?

The answer is the retained earnings are very modest because we're paying out between 90% and 95% of our earnings. So the scope of us being able to do anything material in buying back shares in the absence of dramatically cutting the dividend kind of wouldn't move the needle. And actually, what we -- what -- if you think about what we're doing is, every time we issue some shares, we're selling a little bit of our, if you like, our Global Equity strategy, and we're putting the money into somewhere else. So every time we're doing it, we're slightly diversifying from our most concentrated area. And if we did it in the other direction, and our business strategy is to develop a broader and more robust business, buying back shares would actually make us even more concentrated in the area we're trying to diversify from. So I'm not sure -- and to do it in any meaningful way, it would have to be a substantial change of our dividend policy. And I suspect to do a substantial change to the dividend policy, our shareholders would murder us. We think what we're doing is very, very logical in order to build a more diversified and more valuable business over time as opposed to a more concentrated and higher risk business by embarking on a buyback. You have to always invert the problem. Buybacks, it just increase earnings per share in the short term and to move them in a -- needle, you need quite a large buyback relative to your size, which means you need a lower payout ratio. But it actually causes concentration risk as well there. So we think we've got the right balance there, and we think our shareholders value the high payout ratio that we have. And we've got a very modest amount of retention that helps us with the diversification strategy, which we think adds value over time.

Thank you, Hamish and Brett. There are no further questions relating to Magellan Financial Group.

Well, I think we've probably had our longest shareholder meeting of all time, which is terrific, by the way, because we've had an important time with some uncertainty, but had some really, really good questions, which to have you, shareholders, engage at a time like this is incredibly important. So there being no further business, the meeting is now officially closed. I thank you for your attendance today and your interest in Magellan. I hope you all can go and have a virtual sandwich or a drink or a physical one. Next year, we'd love for you all to join us, and we look forward to after our meeting next year for the directors and management to be able to see our shareholders face-to-face. So thank you very much for your attendance today and your interest in Magellan.