Letter to Australian Financial Review

15 May 2009

Geoff Winestock’s 13 May 2009 article titled “Sometimes less can be rather Moore” has made a number of factually inaccurate and misleading assertions and statements.

First, the article implies that the composition of the Directors’ Profit Share (DPS) portfolio is being manipulated.  It states: “the portfolio was adjusted over the past two years of the global financial crisis so that they received much better returns”; it implies that poorly performing stocks are dropped to enhance performance; and it suggests that a “DPS financial planner” is used to assist with stock selection.  In contrast to these assertions, the Macquarie Group Remuneration Report, at page 81, discloses that the Board Remuneration Committee annually makes a determination about the composition of each Executive Director’s portfolio to ensure it is aligned with their management responsibilities.  When Mr Moore became Managing Director and CEO in 2008, his portfolio was adjusted to reflect his expanded responsibilities.  In addition, 35 per cent of his 2009 DPS was invested in Macquarie shares.

Second, the article suggests that the portfolio is not being appropriately valued.  It suggests that “artificial values” are being used for listed stocks, instead of market prices and that the indicative value of the portfolio can be calculated based on the stock prices of three listed funds, namely Macquarie Airports, Macquarie Countrywide and Macquarie Infrastructure.  The assertions are simply wrong.  Listed stocks in the portfolio are valued based on total shareholder returns (listed prices, adjusted for dividends) and the portfolio consists of a very broad cross-section of Macquarie funds, including foreign funds, which are also impacted by foreign exchange rate movements.

Third, the article makes repeated comparisons between the portfolios in which the executives are invested and Macquarie Group shares.  There is no linkage because the DPS is not invested in Macquarie shares. 

Finally, it is implied that the way the portfolio is valued will provide a benefit to executives in the transition to Macquarie’s proposed remuneration scheme to be put to shareholders at Macquarie’s AGM.  This is misleading and incorrect.  As pointed out above, the valuation methodology is robust and there is no additional benefit to executives.  Moreover, in the case of Mr Moore, since 2008, a portion of his profit share (10 per cent in 2008 and 35 per cent in 2009) is already invested in Macquarie shares, with 20 per cent in the DPS.  

Yours sincerely

Greg Ward
Chief Financial Officer