7 questions lodged at 2024 Pinnacle hybrid AGM

Q1. Many thanks for blazing the trail releasing the formal presentations and proxies to the ASX at 6pm last night ahead of today's 9am start. Great to see there were no protest votes so presume that means the proxy advisers and major shareholders are all at one in supporting the current board composition, governance, performance and remuneration arrangements. How many of the proxy advisers issued a report ahead of this meeting given that we're now capitalised at almost $4 billion. Finally on AGM process, I couldn't find a copy of last year's AGM webcast on your website. Could you please ensure a copy of this year's is made available as less than 5% of your 6,618 shareholders will have tuned in live and they shouldn't be denied access to a record of the AGM debate.

Written answer provided later by CEO Ian Macoun: We are not intending to publish the AGM recording itself. The feedback is that very few people actually listen to it. We publish a great deal of material for shareholders (including, in relation to the AGM, a detailed presentation and the text of my speech; and the recordings of our earnings calls, including Q&A, following the release of our financial results twice each year). We believe (and have received extensive feedback) that we keep shareholders well informed and maintain a well structured and easy-to-navigate shareholder centre on our website. We avoid dumping an overwhelming mass of material there.

Q2. In June 2020, S&P booted us out of the ASX200 and then in September 2021 we were re-admitted. Whilst at one level we shouldn't talk about index investing at a stockpickers annual meeting, could Ian Macoun comment on our prospects of being admitted to the ASX100 particularly given our surging share price, capital raisings and all these takeovers of existing ASX100 companies that are thinning out the ASX ranks. Does Ian know how S&P treats the 20% of our company that is owned by him and Steve Wilson in terms of assessing the available free float from an index perspective?

Written answer provided later by CEO Ian Macoun: In relation to the ASX100, certainly there is the very real prospect that at some time in the future we could be admitted to the ASX100 index. That is still some distance away, though, as in calculating the ‘free float' the holdings of Steve Wilson and myself are excluded.

Q3. We are becoming an increasingly important player from a governance point of view now that our funds under management have topped $100 billion. For instance, we have recently gone substantial in ASX200 companies such as Nick Scali, Technology One and Smart Group. What is our approach in terms of voting at their AGMs, engagement and agitating for transparency and good governance at listed companies? Do we subscribe to any of the proxy adviser services to assist with these considerations, disclose our voting record like industry funds and regularly vote against resolutions at AGMs when concerned about the direction of a company? If not, why not? As a long serving executive director up for a election today and partially responsible for this area of the business, could Andrew Chambers also provide his perspective.

Written answer provided later by CEO Ian Macoun: Often when you see Pinnacle named in a form 603 as a substantial shareholder, this is by virtue of our role as responsible entity of the funds managed by our affiliates. These are not balance sheet investments by PNI, they are positions in our Affiliates' strategies. Pinnacle itself does not take active investment positions in listed companies. Supported independence is an important principle of our business model. We do not interfere with the investment decisions of Affiliates and accordingly, Pinnacle does not have input or influence on how Affiliates should vote or engage with companies that they have invested in. Our Affiliates do subscribe to ISS Governance for proxy advice services and have regard to those reports when formulating their views on how to vote. Affiliates who manage public equities have proxy voting policies that are available on their websites which explain their approaches to proxy voting.

Q4. Two weeks ago our partially owned fund manager Metrics Credit Partners became the owner of the Pacific Hunter restaurant business after private equity firm Quadrant walked away from its equity ownership. This means our affiliated credit fund now directly owns and runs brands such as Rockpool, Spice Temple, Sake, Fratelli Fresh, El Camino Cantina and Beerhaus. How did it come to this that we were seemingly the single lender to a risky high-end restaurant roll-up owned by a leveraged private equity fund? How big is our exposure, are we confident of selling the business and have we learnt any lessons from this exercise? If, for instance, we ended up losing $100m on this exposure, would that loss ever make it into our financial statements. Finally, if we still own the Pacific Hunter business in 12 months, can the the physical component of the 2025 Pinnacle AGM at least be held in one of their nice restaurants?

Q5. Your slide on page 48 of last night's ASX announcement makes it look like MXT was floated in 2015, when we actually raised the $516m at $2 a unit in October 2017. Seven years later, MXT is capitalised at $2.2 billion, but the unit price is only $2.07. MXT has done lots of capital raisings, usually via placements and SPPs, but there doesn't appear to be a lot of transparency for investors about what is done with their money, or even how much MXT is looking after. For instance, the slide on p48 says that Metrics has $19 billion under management, but the September monthly report released by MXT to the ASX on October 10 put the FUM at $21 billion. Which is correct? Since inception, MXT has returned a reasonable 6.18% but isn't it time you started doing things like holding an annual meeting so that the 24,521 investors who have entrusted MXT with looking after $2.2 billion can actually meet the directors and management. I don't understand how and why MXT has become such a large LIC which has nothing like the transparency or governance of other LICs such as AFIC and Argo.

Written answer to both MXT questions provided later by CEO Ian Macoun: In relation to MXT, you are correct that its IPO was in 2017. The slide on page 48 shows progress in Metrics up to June 2024 (some of the text boxes are slightly either side of the dates of the actual events for spacing/ease of reading only). We update FUM numbers for our Affiliates six-monthly – the number on this slide is as at June 2024 – whilst in their September monthly report for MXT, Metrics provided FUM as at the end of September. There is therefore a difference between the numbers reported. A major part of the explanation for your questions here is that MXT is a Listed Investment Trust not a LIC. Metrics provides extensive reporting to its unitholders. It is Australia's largest private debt manager with a team of over 150 investment professional. Metrics should be thought about in a very different way to many of the smaller private debt managers in the market. Metrics operates under very high governance standards with an independent responsible entity, Ernst & Young conducting independent monthly pricing and impairment testing across every asset in its portfolio, and KPMG undertaking a half-yearly and annual review. Metrics is a leader in the space and we are very confident in the team's ability to continue delivering for its clients. In relation to the confusion as to Metrics' FUM and AUM, Pinnacle has in the past reported Funds Under Management whereas Metrics has reported Assets Under Management which we believe is a more accurate way of reporting for a private lender.

Q6. A question for independent director Debbie Beale, who is up for election today. The AFR published a 23 minute podcast on July 11 which was headlined: "Will private credit's golden age come to an end?" The introduction read as follows: "Private credit is booming. Once a cottage industry, it is now attracting billions of dollars, reshaping the financial system and minting new fortunes. In Australia, private credit funds are on track to manage $200 billion in capital. But fast growth and loose regulation has prompted talk of a bubble." We're the biggest player in this industry with our $19 or $21 billion that Metrics is managing. Could Debbie Beale provide her perspective on who is regulating what we do? Are we the people making a fortune and is this a bubble? How are the independent directors managing this risk in a fast growing sector? Could the CEO also comment on this issue.

Written answer provided later by CEO Ian Macoun: "We ensured that several of your questions were put to the meeting (certainly those which would be of most interest to many shareholders) but didn't get to all of them given time constraints. I apologise, we had a lot of questions including from the floor on the day." Presume this one wasn't covered.

Q7. There aren't many ASX200 boards which go 6 years without appointing a new director but that was the case at Pinnacle until Christa Lenard's appointment. Why has there been so little change in board size and composition? Also could Christa and the chair comment on the recruitment process that led to her appointment to the board. Was a head hunter involved, did the full board interview Christa and did they interview any other candidates? Did Christa know any of our directors before engaging with the recruitment process and why didn't she buy some shares before the appointment was formally announced? Is she ever going to buy some shares?

Written answer provided later by CEO Ian Macoun: "Your questions on the following topics were asked and received a substantial airing: Private credit and Metrics, the Pacific Hunter investment etc; Board composition/the recruitment process that led to Christa's appointment etc." With no detail provided or a webcast published, am not aware of what the answer was.

Copyright © 2024 The Mayne Report. All rights reserved

• share
  Share
  • 
    Facebook
  • 
    Twitter
  • email
    Email
  • print
    Print
  • link
    Copy Link
  • cancel
    Cancel