Questions lodged at the Moelis AGM

June 9, 2021

Is Jeffrey Browne suitable to become Collingwood President? He is the current chair of ASX-listed Moelis Australia and below is a case study looking at how Moelis Australia handled the 22 online written questions which Stephen Mayne lodged during its May 28 AGM. Only 5 of them weren't asked. The company refuses to publish an archive of the AGM webcast, which is poor transparency.

These written questions were also submitted during the actual AGM, not before hand. And it was investor relations manager Michael Leonard who decided the order in which they were read out. Go here to see the actual transcript of the 27 minute Q&A session.

Question 1, which became question 2. Could chairman Jeffrey Browne please clarify whether he is running for the Collingwood Presidency or not. If he does successfully replace Mark Korda, will he have the time to continue on as our chairman?

Chairman, Jeffrey Browne:
Well, there is no process in place to replace the Collingwood Chairman and if there was and I became the Chairman of Collingwood Football Club, I could easily combine those duties with the duties I have to Moelis Australia.

Question 2, which became question 1. Why didn't you allow shareholders to physically attend today's AGM when there are no meaningful restrictions in Sydney and numerous ASX listed company have allowed physical attendance at Australian AGMs during the current AGM mini season?

Chairman, Jeffrey Browne:
Well, as I mentioned earlier in my address, the safety of our staff, our executives and certainly our shareholders is our primary concern and I'm sure that had we planned to hold this meeting physically in Melbourne at the moment, we'd find that what we've chosen to do today is the proven course.

Question 3, asked as question 3. "Which of the proxy advisory businesses cover Moelis and what do you think of the Federal Government's plan to force proxy advisers to show public companies their reports five days before they are published for fact checking purposes?"

Chairman, Jeffrey Browne:
I'm not sure – I haven't checked with all the proxy advisors in relation to the first part of that question. I know that ISS did issue some information in relation to the meeting and I do think it is a good idea that those reports be submitted to the company for fact checking before they're actually published before the meeting.

Question 4, asked as question 4. What was our approach to JobKeeper both at the listed company level and within the funds management business? Please explain how much Redcape Hotels took and which of our other businesses qualified and for how much?

Chairman, Jeffrey Browne: Well, the second part of that question is a matter for Redcape. In relation to the first part of the question, we did qualify for JobKeeper one, we did not qualify for JobKeeper two. The reality is, the benefit of JobKeeper one made it possible for us to retain our business structure and our key people and avoid having to make deep cuts into our workforce which we otherwise would have made, which would have severely prejudiced our potential moving forward over the next many years. So, JobKeeper, in that sense, did exactly what it was intended to do and provided significant support for us in keeping the team together at a time when there is competing competition for executive staff amongst some of our competitors and new entries into the markets where we operate.

Question 5, which was never asked. In 2018-19, before COVID hit, Redcape Hotels generated $285 million in revenue, which included 62.8% or $179 million in gaming revenue. Why do we report gross gaming revenue when Australia's biggest pokies operator, Woolworths/Endeavour, nets off state gaming taxes and therefore claims to only have $700 million in annual gaming revenue?

Question 6, which became question 8. Will a full recording of today's AGM remain available on the Moelis website and will the board also undertake to publish a full transcript of proceedings, a practice embraced by the likes of Transurban, Woolworths and Crown Resorts?

Chairman, Jeffrey Browne:
Well, what we'll do is, consistent with previous practices, publish the two extensive addresses, more general by myself, but Chris's very detailed analysis of the business, we'll publish those on the ASX website.

Question 7, which became question 6. As the second biggest NSW member of the Australian Hotels Association after Woolworths, what is our view through Redcape Hotels on the AHA's campaign against the NSW Government's move to cashless pokies in an attempt to stamp out criminal money laundering and reduce gambling harm?

Chairman, Jeffrey Browne:
Well, the cashless issue is a concept at the moment, we need to know more detail about that. As a business we are constantly interested in harm minimisation and responsible gaming.

Censoring a block of Redcape pokies questions

The next 3 Redcape question were never asked but the investors relations guy reading out the questions and the chairman did have this exchange about them. They failed to mention that Moelis-managed Redcape refuses to hold an AGM so it is difficult to fire questions directly at them.

Michael Leonard: Now, we have some further questions in relation to Redcape from shareholder Mayne, those questions relate to some more technical elements of Redcape in relation to policies around the AGMs, the corporate activity and financial reporting of gaming revenue. Chairman, would like to answer those in aggregate or would you like me to read each out individually?

Chairman, Jeffrey Browne: Well, I think questions for Redcape are questions for Redcape, it is a separate public entity, it's separately audited and the questions like you've indicated, what I expect may be contained in the further body of the questions that you have should be directed properly to Redcape.

The censored Redcape questions

Question 8, never asked:
Redcape Hotels is a publicly listed company with an open share register and a market capitalisation of $563 million. It is managed by Moelis which refuses even to hold an AGM for Redcape shareholders. Why not voluntarily hold a Redcape AGM so that questions about this business can be directed at the Redcape board, rather than here at the Moelis AGM?

Question 9, never asked: Endeavour Group has indicated in its explanatory memorandum that it is likely to expand aggressively after the Woolworths demerger, in contrast to that hand-break on acquisitions which Woolworths has applied since 2013. Are we expecting an explosion of activity from Endeavour and do you think they would be interested in buying Redcape. Have any discussions been held?

Question 10, never asked. We heard today that funds management is delivering 84% of EBITDA. Which are the biggest funds contributing to this revenue and what risk is there that Redcape Hotels could choose to sack Moelis and internalise management, similar to what many listed Macquarie funds have done?

Question 11, asked as question 13. Has the New York listed Moelis & Company voted on the remuneration report or any of today's remuneration items and what has happened with the staff share scheme? Did it vote in favour of the remuneration report or abstain?

Chairman, Jeffrey Browne:
Well, the directors of Moelis Australia have voted in relation to the remuneration report and it is in the form that we've previously adopted, it is subject to ongoing review by the board of our company here in Australia and with the considerable assistance that we've already started to see from Alex Goodfellow, who's joined as Head of our Remuneration Nomination Committee. So, Ken, as a director is cognisant of policy and supportive of the board's resolution to adopt the policy and to place that before shareholders at today's meeting. I'm sorry – the question was, did Moelis & Company vote?

Michael Leonard: Yes.

Chairman, Jeffrey Browne: Sorry about that. No, they didn't.

Question 12, asked as question 9. A question for co-founder Andrew Pridham: Is Macquarie Group the model for our growth and development. Which sectors does Macquarie currently operate in that we don't but potentially could move into as the business grows?

Chairman, Jeffrey Browne:
I'm happy to give Andrew an opportunity to answer that (well, actually he didn't), but as it's been made clear in the addresses, we're very focused on very specific areas that I've called out in relation to our business. We run our own race, we've developed themes which we believe are very scalable and we've resourced to make the most of those opportunities and I think we should be and remain the masters of our own destiny.

Question 13, asked as Question 14.
Could Andrew Pridham comment on how he's adjusting to life as Deputy Chairman and not the CEO? What sort of hours is he putting into the Moelis business and what steps has he taken to ensure the new joint CEOs have enough scope to develop their own profile?”

Chairman, Jeffrey Browne: Well, I'm happy to answer those but I think I might invite Mr Pridham to respond.

Andrew Pridham: I'm adjusting quite well, thank you, Stephen, and days like this remind me why I'm adjusting so well. Chris and Julian are doing a magnificent job and I think that it's reflected in the performance of the company, I think we're very lucky to have their leadership and I am full-time executive, working very hard on behalf of all shareholders, even you, Stephen. Thank you.

Question 14, which became question 5. We arguably went over the top paying $100 million for the Beach Hotel in Byron Bay just before the COVID shutdowns in February last year. In which fund has this asset finished up in and are we going to return poker machines to this venue after the previous owner removed them to be more socially responsible in 2018?

Chairman, Jeffrey Browne:
Well, it's in a separate fund, I don't believe we paid over for that. In fact, the trading in the month of January, 2021, was an all-time record, with some restricted attendance at the venue. We're very happy with the operation of the hotel, it's a food and beverage venue and we've developed our skills in food and beverage and the result which I attested to for January is a testament to the success of that.

Question 15, which became question 7. Moelis is the largest Australian operator in terms of bringing wealthy Chinese citizens to Australia through the Significant Investor Visa Scheme, which our unlisted managed funds are structured to qualify for. What impact does the current Federal Government stand off with the Chinese Government have on this aspect of our operations? Are more wealthy Chinese citizens looking to come to Australia given the Chinese Communist Party's increasingly belligerent and ruthless conduct?

Chairman, Jeffrey Browne:
Well, the significant investor visa program was only very recently reviewed by the Australian Government and endorsed and in fact, improved with the increase in the number of visas and the speed up in the time required to process the visas, so we expect that to be continuing very strong revenue source for our business. I should say that we source funds under that program from many countries other than China and we're not totally dependent there, although we do see continuing growth opportunities and we are concentrating efforts in China through our offices there to improve that result.

Question 16, asked as question 10. Could we please hear some brief commentary from the other joint CEO, Julian Biggins, on what it is like being joint CEO with Chris Wyke. This is a very unusual public company management structure. Could Julian explain how he and Chris resolve disputes when they differ on major strategic, personnel or transactional issues?

Chairman, Jeffrey Browne: Well, without wanting to accommodate the intent of the question, I did say in my opening remarks that the appointment of joint CEOs has worked remarkable well for the company. In relation to any issues of difference, there are no very significant issues of difference, there is active debate amongst the senior executive at Moelis and Company. I and others can get involved in that when we feel we need to broaden that discussion and whilst there might be a presumption that joint CEOs are generally not a good idea, the fact that it has worked so well for our company is indeed a great asset for shareholders and I'm very, very pleased that the transition from Andrew to Chris and Julian has worked as well as it has.

Question 17, asked as Question 12. I disagree with dropping the Moelis name. Could Ken Moelis please comment on why he agreed to this change when it gives the ASX listed company Wall Street credibility, a big contrast to the meaningless MA Financial Group name.

Chairman, Jeffrey Browne:
I should comment, as Chairman, this was a board decision, it's not Mr Moelis's decision. We work very closely with our colleagues at Moelis & Company. As the Moelis Australia business expands overseas, we need to ensure that there's no confusion between the ongoing activities of Moelis and company and what is now known as the MA Financial Group or shortly to be known as the MA Financial Group. Nothing has changed in relation to the strategic personal business relationship between Ken and our great company here in Australia and we believe that this fresh new rebranding gives us a very positive identity in the markets in which we operate.

Question 18, never asked. Have there been any meaningful protest votes against any of the items of business today. Please disclose these before the debate on each item so there is an opportunity to ask a follow up question as to why there was a protest vote?

Question 19, asked as Question 11. Simon Kelly is a good hire given his background at Aristocrat. Could Simon please comment on how involved he is with our Redcape business.

Chairman, Jeffrey Browne:
Well, I'm happy to ask Simon to comment in relation to that, other than to note that he is recently appointed. His remit is as Chair of the Audit and Risk Committee and as I've said previously in relation to earlier questions of a similar theme, matters in relation to Redcape are principally best addressed to the Redcape board.

Question 20, asked as question 15: Is the company planning to do another placement and if that occurs, will you undertake to also offer retail investors a Share Purchase Plan? Why bother to refresh the placement capacity if not planning another placement?

Chairman, Jeffrey Browne:
Well, what we've done is replace the capacity to the 15 per cent that we've generally held. There are no specific plans, but that's a prudent provision to make.

Question 21, edited down and asked as Question 16. This was submitted: "Andrew Pridham has a net worth of least $200 million and Moelis Australia shares worth around $155 million. Why does he need any more incentive through this issue of new stock and why doesn't he work for free like James Packer did for many years at PBL and Crown Resorts?" But it was edited down to just: "Why does Andrew Pridham need more incentive stock in this issue?"

Chairman, Jeffrey Browne:
Well, stock placements are there to incentivise people and to reward them for the very hard work that they do in bringing business to the company and Andrew notwithstanding that he has moved from the role of full-time CEO, I suspect his wife would tell us he's working no less and entitled to be incentivised to keep that effort up for the benefit of the company.

Question 22, asked as question 17: There was a big protest vote against the rem report. What was the problem identified by proxy adviser ISS. Was it the structure of these incentive grants and will there be first strike?

Chairman, Jeffrey Browne:
There was no vote against the remuneration report by ISS. Our remuneration report, by the look of the proxies, passes with approximately 77 per cent majority, which is down on the 93 per cent that we achieved last year. The reason for that, I can only suspect, some misunderstanding in relation to how we've applied that policy.


For a fuller write-up of the Moelis Australia AGM, check out this recent Eureka Report column.