Hello everyone, and welcome to the Future Generation Australia Full Year 2025 Webinar. Thanks very much for joining us. Before we start, I'd like to acknowledge the traditional custodians of the land where we are, and pay my respects to elders past and present. I'd also like to introduce the two people here with me. Geoff Wilson probably requires no introduction. He's the Founder of Future Generation and Director of Future Generation Australia. Thanks for coming along, Geoff. Thanks for inviting me. Pleasure. We've also got Matthew Kidman. Matthew is the Co-founder and Portfolio Manager of Centennial Asset Management, a longtime supporter of Future Generation, pretty much from the day dot, I think, both in terms of time- From day dot. Day dot. I think so, yeah. and performance. Probably a little bit before day dot. One of the first phone calls probably for Future Generation. Thanks very much, Matthew. Thanks, Matt. Delightful. For coming forward, for coming along. Before we start today, I would just like to make sure everyone's aware of the disclaimer, and the small print there essentially says that the three of us today, anything we say is general in nature. There is no personal financial advice being offered today. Please speak to a financial advisor if you want any of that. The agenda today is Geoff's gonna give us a quick update on 2025 from the board's perspective in terms of dividends and how he's seeing things, and then I'll give a quick update on the portfolio, how 2025 went, how we've positioned, a little bit of a look through on how we're currently positioned, and then we'll have a chat with Matthew. There's plenty going on in the market. Matthew's had a great year in 2025, so it'll be good to find out how he achieved that and how he's positioned going forward. With that, Geoff, we might get a few comments from you. Right. Look, thanks Lee. Look, thank you all the Future Generation shareholders. You know why we do this is to communicate with you guys on a regular basis. It's your company and, you know, the board is there. You know, even, you know, the board does the work pro bono. You know, Matthew and all the other fund managers, you know, do the work pro bono. Look, thank you for that. Thank you for your support. In terms of the last 12 months, it was really a very solid year for Future Generation Australia. The portfolio outperformed the market. Actually, I think the portfolio was up about 14%. Now, that's before the 1% goes out to support our children at risk. The market over that period of time, you know, the All Ordinaries was up about 10%, so that's really, you know, really solid outperformance. In terms of dividends, you'd all be aware, you know, the dividend was able to continue to be, you know, slightly edged up, and, you know, provide you know, shareholders a yield of about, you know, a little over 5%. I think it's 5.3% odd on the share price, and gross that up, you know, you're in the sevens, around the mid-7% in terms of if you get the refund back from the government. In terms of, you know, that's on share price, and you'd be aware that the share price is trading at a little bit of a discount to NTA. I think it's around about that 8%-9% discount to NTA. You know, go back, it was at a larger discount. You know, the plan for us is annual. I know Lee's, you know, came in more recently. Actually, you might be able to claim most of the credit. I'm claiming all of the credit. Because since you've been there, the discount's narrowed, hasn't it? Yeah. Continued to narrow. Very true. Bonnie, who's joined us as general manager to take over from Caroline, you know, we expect Lee and Bonnie and the rest of the Future Gen team to continue to perform from a board's perspective in terms of, you know, in terms of the investment committees selecting the right managers. There's underlying performance there as for investors, but also to get the share price to fully reflect, you know, the value of the assets. At the moment, it's sort of like you go down to, you know, BMW to buy a car, and say it's a AUD 50,000 car and you're only paying AUD 45,000. Actually, if I went down to BMW, I'd probably be paying a lot less than that. It is, you know, to me, it's relatively cheap, you know, because you're buying assets cheaply, and where should it trade? There's an old theory about listed investment companies. I think when I started, you know, looking at, you know, creating our first listed investment company, which I did with Matthew Kidman when he worked at Wilson Asset Management in the, well, we won't say good old days. I'm gonna say previous century. That's right. Last century. Yeah. That's right, it was. Now, when you know, when we're looking at that, there's a theory that, you know, maybe a listed investment company should be trading at a discount, which is the net present value of the management fees. Now, you'd be aware with Future Gen, there's no management fees. Like all the work Matt and the other fund managers do pro bono, the board's there pro bono. There's no performance fees, no management fees. So if you work out, and if you accept the 1% going to support the charities, and you do a net present value of that benefit, then you could argue that both these Future Gen entities should have implied premium to, you know, to pre-tax NTA. What's, you know, the NPV probably gives you 6% or, you know, 7% premium. We're looking forward to trade at a premium. Quite a period of time where they've traded at discounts. Future Generation Global is trading within a couple of percent of NTA. FGX is still about 8% or 9%. The plan is to get it to fully reflect the actual trade at NTA, if not a premium. Thanks. Yeah. Thanks. Thanks very much, Geoff. From a portfolio perspective, 2025 was, as Geoff said, a good year. 14.1% and well ahead of the 10.1% return of the All Ordinaries. The first is we have some fantastic we think the best fund managers in equities working with us. There are 16 of them. They're highly diverse. The other way, the objective we're trying to deliver market or better returns, but with lower volatility as a measure of risk than the index. If you look over the life of FGX, that's been achieved, so better than market returns since it started, and the volatility is something like 17 or 18% lower than the index, so getting great risk-adjusted returns. We get good managers, and we make sure they're appropriately diversified. The managers all invest in different ways. We have large cap managers, small cap managers. We've got long-short managers, systematic managers, all sorts of different strategies and styles. The blend of those that the investment committee, all working for free, put together is the secret sauce that helps us to deliver those results. Periodically, we do look-through analysis to look at what those managers are investing in. We're picking the fund managers, we're making an allocation to those, but they're picking the companies that they invest in. Around the world, one of the issues that's been around now for over a decade is markets have been becoming more and more concentrated into a small number of very large companies. That's not been so much a trend for Australia. It's always had quite a lot of concentration inside the top ten. When you look at the spread of the index across market cap bands, you can see that there is a heavy concentration in the top end of the market. To put some context around that, there are around 2,000 listed companies in Australia. The All Ordinaries represents the 500 largest of those, but the top 20 largest make up over 50% of the index, so they're really dominating the performance of the index. When you look at the Future Generation Australia profile, we have a much broader spread outside of the top 20, top 50 companies. In fact, something like 60% of the companies that are held by the managers we invest in are outside the top 50, and that gives us a much broader diversification. Diversification really helped us in 2025. Smaller companies, the smaller company index, had a really good year. It was up around 25%, so more than double the All Ordinaries, the broader index. That having that diversity and that spread into small and medium-sized companies was super helpful for us and helped to drive returns. If we go a layer deeper and look specifically at the very large companies in Australia, you can see, I think, on your screens now the top 10 companies in Australia. Quite concentrated. CBA alone is 10% of the index. If you add together the Big Four banks and Macquarie, you get over a quarter of the index. They're very dominant companies inside the All Ordinaries. Future Generation has exposure to those, but it's much less. We have closer to 8% exposure to the financials index, the financials part of the index, and a much lower exposure to the top 10. That enables us to spread the risk and diversify our exposures. That's particularly important at times when uncertainty is heightened. We don't have all of our eggs in one basket. We're spread across the market. That's how the market is positioned now, how the portfolio is positioned now, and we think that's a sensible way to be positioned as we face a lot of the uncertainties, which I'm sure we'll speak to Matthew about in a moment. The other major objective that Future Generation Australia has is to do good. We realize that we've got to do well for our shareholders first, but because of the way the model works, once we're doing well with the portfolio, which we feel we're meeting our objectives there, we're able to do a lot of good in the community as well. Because as Geoff said, all the fund managers work performance and management fee-free, a lot of our suppliers all work for free, we're able to make some very significant savings. In fact, in 2025, the fee and expense savings in FGX were over AUD 11 million. It's a pretty chunky number. Of that AUD 11.4 million to be precise, of that AUD 11.4 million, we were able to donate 1% of assets, which was AUD 5.7 million, to some great causes that support young people at risk in Australia. We haven't got time to go through the detail of all of the great organizations that we support, but it is worth having a look at our website. We've got all of them listed out, all of the not-for-profits that we support listed out, some detail about what they do, and case studies of the types of children that we're supporting. Our second objective is to do good. As I said, last year, Future Generation Australia donated AUD 5.7 million. Over its life, it's been close to AUD 50 million. When you look across the Future Generation network more generally, AUD 100 million has been donated to not-for-profits, and that's against a saving of AUD 175 million. The difference, of course, as Geoff was saying, goes back into the company, and it's to the benefit of shareholders. That's the update on the portfolio. If there are any questions, we'd love them. I can see some questions have been coming through already, so please keep those coming. We might turn to you now, Matthew. As I said, you've been a long-term supporter. You've surrendered a lot of fees to our good causes. I do know how many- Thank you. I wasn't gonna tell you. My pleasure. Not embarrassing. I won't embarrass you. It's a good number, so thank you for that. Thank you. It's really that transfer of fees saved to the charities which makes the whole model work, so thank you very much. A fantastic year last year for your performance, so thank you for that. Could you maybe run us through how you did that? Any particular contributors, any factors you saw that really helped you in 2025? Yeah. It was a solid year. As you said, small caps did really well in the market, and we concentrate on small caps. Now, we've got a lot of flexibility. It's out of the Geoff Wilson kit bag. Keep as many options available as possible. It's said, in the early years, I watched Geoff assemble how he went about managing money in a portfolio since, and it hasn't, for us, changed that much. We can do a lot of different things. We can go as much cash as you want, and we can go into big caps if we need to. We can go right across the board. Last year was an interesting year, like most years are in the markets, but you know, we had the tariff impact from the U.S., so in that period we were highly cashed up. You know, there was a reporting season then into February, and the market just fell away dramatically into early April, and at that stage we were 35% cash. As it became obvious that the U.S. were gonna you know, back off on that tariff strategy, we thought, "Well, here's an opportunity," because on the other side of the ledger was interest rate cuts, so from a macro policy. We went back to 95%-97% invested. For us, that's about as much as you can get. We don't gear. You know, we normally have 45, 40-50 stocks. We don't follow an index, so we just pick the odds out of what we think is working. Why we probably couldn't knock the cover off the ball was that what really drove the small cap world was resources and mainly gold. We don't play. We're always underweight that area. I've never been great at investing in resources, so you know, we did it slightly with you know, one arm tied behind our back last year. That flexibility really helped us, that asset allocation. A lot of fund managers aren't allowed to do that, but we prioritize it. The other thing is that we're small. You know, we're a AUD 280 million fund. 20% of the money in the fund is the insiders, the four or five people that work. We're five people in the office, four on the investment side. We've all got reasonable amounts of our money in the fund, and so we'll protect your downside as much as possible. Because it's your own money. That's right, you don't wanna lose it. Yeah, exactly. Yeah. In part, it is the reason you said before that you want flexibility, because if a lot of the small-cap funds at different times get absolutely smashed, because when liquidity dries up in a market, the small caps get hit harder for obvious reasons. People migrate towards where the liquidity is. It's got a comfort area. The businesses are more developed, and so on, so you wanna be there. You know, that really worked for us. On average, over the 15 years we've been going, we capture about 30%-35% of the downside for the small cap market, and we get about 70% of the upside. If you mix that through with the portfolio structure we got, we should do net, and you guys, it's slightly different because of the performance fee structure and that. We should do net 13%-14%, you know, a bit higher, under Future Generation, and we've done that almost to the number. Now, that's a bit of luck. You might see me next year where the market's down 30% and our numbers are a bit less than that. If you get a bull market, you'll go above that. That's what we do. Final answer to your question, where do we go, we're small enough to go where things are happening positively. We don't have to think two years in advance and try and guess where the world's heading. What worked last year was CapEx, AI CapEx pouring out of the U.S. finding its way into Australia, data centers, you know, electrical services companies. Also there's a big CapEx spend in energy transition. There's big spend just generally in the mining area. The CapEx side of Australia, which has been underfed for years, all of a sudden is now the dominant. We stayed away as best as we could from the consumer, or that part of the economy, which is about 60%. It all changed in the end of the year when we went from, "We're gonna get more interest rate cuts next year," to by October people were saying, "Maybe there's no cut," and by Christmastime, "We're gonna get a rate rise." That has been a huge impact on the market. You know, the 10-year bond went from 4.1% to almost 5%, and at the short end, the RBA's going now and we're not quite sure how much. We might get an interest rate increase next week. I don't know. That's made the market really heavy. In the last few months, we've gone very defensive. We've lifted our cash position. We've even- Well, how much cash would you be holding now? Well, that 95% turned into about 70%-75%, and we've gone a lot more defensive in what we own. 75% invested. Invested, yeah. 25%. Yeah. It's not a disaster. Yeah. It's not like in 2021, 2022 when rates, we didn't know how high they'd go. Yeah Because the rest of the world were, you know, putting rates up at a rapid clip after so low. This is more of an adjustment, we hope, but it's enough to just sit back and watch it for a bit. We've even invested in companies at the bigger end. It's not a dominant part of our portfolio, we're still small cap guys but, you know, we've got a position in Woolworths at the moment. They're operating really well. It's food. It's not a bad place to park your money for the moment, but we won't hold it for that long. Things like that we're doing to move around and try and adjust. I would say what we're doing today, you've got rates on the rise. That's a worry. Let's see where that ends, and when it does end, we'll switch again. You have a war in the Middle East that's causing a lot of anxiety, and obviously a bit more inflation with the oil price. You've got disruption with AI, which we talked about, you know, pre-webinar. We're talking about what it can do for businesses, but it's hurting some businesses, so you have to stay away from the tech software thing. We're lucky enough to do that. At the moment, you wanna play defense and protect your money. What is defense now? I mean, the bank, I mean, I know you're a small cap, but the banks looked expensive for ages. Yep. Resources, they're leveraged to global growth. Yeah. Consumer, potentially at risk from interest rate rises. Is it hard to find? It's narrow, but CapEx spend- We've done really well out of mining services, 'cause the miners are spending a lot of money. Yeah. There's been an underspend from Australia's big, you know, there's the culprits, BHP, Rio Tinto, Fortescue, and a few others. That is powering ahead, and the plans for the next two or three years are enormous spend in that area. The AI spend is accelerating and that, those CapEx budgets that are coming out of the U.S., those unbelievable numbers that we hear about, you know, it's gonna get to $1 trillion from, you know, it's like, it's back like the days from the dot-com boom, except back then it was the equity markets that were- Doling up the funds to get these. Now it's the big U.S., you know, tech companies that have just got so much cash and they're just pouring it in. Where it ends, I don't know. You know, all the companies we speak to say it's accelerating, so you stay with that trend. That's Southern Cross Electrical Engineering. That's GenusPlus, which also do energy transition. That's SKS Technologies Group. Then there's just a general CapEx spend. There's Southeast Queensland's flying and the Olympics are not far away. You can get companies like Wagners. At the small end, there's this smattering. Yeah, yeah. You've just gotta maybe just as I say, it's the CapEx cycle that's working in your favor, but that you don't wanna be in financials, you don't wanna be in, in discretionary retail in particular. You just wanna play a bit of defense, and then we'll do a few turnarounds like, you know, we've been in Tabcorp. Gillon McLachlan's there, he's come in and it was poorly run. There's costs that come out, and there's revenue gains to be made, and it's a business in decline, but it can be a lot healthier than what it is. Valuation's all right. We'll play that. I mean, it doesn't get- Has he done a good job? He's doing a good job. He's probably only halfway through. He's identified what needed to be done. He's implementing it. He's a great politician. Yeah You know, it requires everyone in the industry to come on board, politicians and everyone, because gambling's a sensitive thing, like wagering, and I mean, some people won't invest in that. We're okay with it. That's fine. You know, we'll move ahead with that. It's more of a turnaround. There's little bits and pieces like that, and you put it all together. We don't follow an index. When we're a bit nervous, sell some things out that aren't working, take a bit of cash, don't be too nervous about the fact that markets are jumping up and down. You see, you come in, you've got 25% cash, the market's up 2 or 3% one day, everyone goes, "Oh, we're not invested enough. It's still, you know, got that volatility. It'll calm down. I'm actually quite bullish on the markets and the main reason about that, and maybe I'm preempting some questions, is I think the interest rate cycle in Australia will level out. In the U.S., once the Middle East I think the Middle East is temporary. There's only so much appetite from all parties, hopefully. That will go in the next two, three, four weeks. Oil will settle down, and we'll get back to where the U.S. actually needs to cut rates again. 'Cause the economy's not that healthy. You know, the consumer's not doing that well. Got an election at the end of the year. We would think there's more rate cuts to come. Good for equities. I think now the biggest market in the world, if everyone behaves themselves, we'll pick up at the back end of the year. That's great. That's the dream. To hear some optimism, fantastic. Have a little change. We're small enough to pivot. Yeah. You know, you never go out too far. New Zealand's different. Yeah. I guess, you know, as you say, small enough to be able to get in and out of some of those positions relatively quickly if your mind changes on some of that stuff, or there's some other. 'Cause a lot, the world's changed a lot, as you said, since, you know. Since October last year. Yeah It is a different market. For four or five months out of the tariff saga or the Liberation Day, whatever you wanna call it was just one-way traffic. It was straight up, which was great, but it's changed since then. Yeah. Fantastic. All right. Well, in a broad-ranging answer. Yeah Just about everything I had here. Let's turn to the. There's quite a few questions coming in from shareholders, so let's answer these. The first one is from Casey: "What is the impact of the Middle East war on Future Generation Australia?" I mean, that's a difficult one to answer. Yeah. You answer that. Matt's just sort of covered off a lot of that. The answer is I don't know, but the way that we try and manage that risk is through diversification. We're hoping that we've got enough of a spread of strategies, enough of a spread of opinions among the fund managers who we use to make sure that all of those uncertainties out there, a lot of which Matt's mentioned, things like, you know, the oil price, inflation, bond yields, what's happening in the U.S., private credit, all of those things, our fund. That's one I didn't mention, private credit. Private credit. There's another worry. Yeah. We like worries, though. Yeah, yeah. Worries are good for the market. That's right. Yeah. There's always worries. I mean, there's always been worries. Yeah. Yes, there's enough spread in the opinions and the positioning of the fund managers that we're invested in so that we feel we've got a balanced approach to however that ends. We don't have a view on how that would end. There's a couple here for you, Geoff. From Gary's asking to explain the profit reserve. Yeah. Peter's saying, "I'm invested. I like the income. Will dividends remain and increase in the future?" They're probably similar questions, those two. Yeah. Okay. Okay. Do you wanna have a crack at those? Well, because we've got a company structure, you know, this listed investment company, then when the value of the portfolio goes up, then on a monthly basis, the board can then, you know, whatever, you know, increase, you know, say it's AUD 100 million, the portfolio goes from AUD 100 million to AUD 120 million over a month period, then what the board does is that AUD 20 million change in the value, we put it into the profit reserve. Now, if then the portfolio drops from AUD 120 million back to AUD 100 And it stays there for the full year, and it doesn't come out of the profit reserve. But you've actually made no money, so in your balance sheet, it'll have a AUD 20 million profit reserve, and it'll have retained losses of AUD 20 million, but one nets off the other. Effectively, a profit reserve is a structure that is more an accounting structure that allows you to have confidence as a board that you can pay dividends because the Corporations Act or the tax, you know, the tax guys say that you need a profit to pay a dividend. Yeah. For it to be franked, you need a booked profit, and they call it a booked profit, and that's why we do it monthly, so it'll be booked. If it's fully franked, you need franking credits as well. What you might find is the profit reserve could increase a lot. We could have retained losses as well, and then you'll say, "Well, why haven't you paid it all out as dividends?" It's because we actually don't get the franking until, you know, we get the distribution from the fund manager that's franked, you know, from the shares that he owns, or we pay tax inside, you know, Future Generation Australia. It's not a simple concept. It's just to be aware of it. The fact is, the profit reserve's there, and what magnitude is it at the moment? It's It's about 6.3 years. Yeah. Whatever dollar amount, whatever It's AUD 45.05 Cents I think. Yeah. 6.3 years. You as an investor can be confident that we can keep paying dividends for at least at that rate for, you know, six years plus. You know, the plan is to gently increase them, but our ability to pay the, you know, fully franked dividends means we need to make some money and pay tax or get distributions from the fund managers. In terms of how much franking. Oh, we carry that a couple of years' worth of franking on that. Yeah, we'd like to have about two years up our sleeve. In terms of confidence. Now, obviously, they're board decisions. Now, say if the market fell significantly over a 12-month period, the board may decide to cut the dividend. You know, they don't need to because the profit reserve there and the franking's there. Yeah, to me, they're all board decisions. Does that answer them both? Yeah, I think so. I think Yeah Yeah, in terms of certainty of the dividend, you can have some confidence because there is. Yeah a profit reserve there. Yeah. There is some franking on the balance sheet. That's one of the great things about the listed investment company structure. These, I mean, the listed investment companies are never gonna grow at the rate ETFs are. ETFs are an open-ended pool of capital, so a lot of money can flow in. Also, a lot of money can flow out, and you don't quite know what you're gonna get from an ETF in terms of, dividends or, distributions, or just, they're trusts, so they're distributions. Yeah. Yeah. There's a question here from Craig which sort of opens up a thing we were just referencing to. "Does the current portfolio allocation include any exposure to private credit, debt, or non-equity alternatives through the underlying managers? Or is it fully focused on Australian equities?" Well, the answer is it's focused on Australian equities, but we did just mention private credit, and. There's a bit being written about that canary in coal mine being referenced quite a few times recently. Yeah. The cockroaches. The cockroaches. Sorry. Bloody hell, look. The cockroaches. The Jamie Dimon cockroach. Well, yep. Something you're worried about? Yeah. Well, yeah. Look, there's two ways in my mind that private credit can come unstuck. One of them is a recession or a bad cycle, and so there's a lot of bad debts and that it kills any lending business because you end up having to pony up more capital and so on and whatnot. Don't think we're going through that at the moment. The Americans are hitting what is the other risk, I think, which is the liquidity events. What you've got is investors like mums and dads now which are a bit more nervous. Previously, it was just institutions, but in the last couple of years they've structured products for mums and dads, and once they get a bit nervous, they want their money out. The assets that are being funded within those businesses can't be liquidated in that short timeframe. They've got a mismatch out of, you know, assets and liabilities. That's where you get rates go up and capital being stuck in there and, you know, then they've gotta sell assets which hits prices again in terms of the asset prices. Yeah, it doesn't feel too bad at the moment. There's been a couple of frauds, one in the U.K., not in the U.S., that has got people a bit nervous where they pledge the assets two or three times, the same assets. Right. Which brings most businesses undone when they do stuff like that. Isolated to that, the ones in the U.S. which are the really big ones, and they are meaningful, but people are saying it's not a big enough amount of money in the U.S. to really send a shockwave through, but it can definitely cause a lot of anxiety, and at the moment it's that mismatch between assets and liabilities and, you know, the investors trying to get their money out, but then not being able to get those distributions 'cause of the assets. It can get a lot worse. If there's bad debts. Can get a lot worse. Once launched. In terms of the Future Gen portfolios has no exposure. Not direct- No You can invest with listed equities in Australia. Oh, yeah. In those- Yeah. I mean, you can invest in things like Qualitas. Yes. Yes. Oh, yes. now there's no problems with Qualitas. Yeah They're pretty good operators, but you can invest in MA Financial. They've got- Yes A version. You can do it through the ownership of the companies that are lending. Yes Who own, you know, manage the funds. Not direct, though. Yes. Yeah. In terms of Future Generation. It's all- Not, not- We're invested with equity managers. Yes. Yeah. Yeah. Who are buying equities? Yes. Those equities that they invest in. Yes ... have some- I don't know the exposure on that. I imagine it's tiny. Yeah. Yes. Absolutely tiny if it was. Yeah. If it was anything. Yeah, it could be. As you said, like, there could be one listed here that's been sold off significantly. Yeah. A countercyclical manager could buy a little bit. They could do, yeah. So, but it- I mean, they're real businesses. Yeah. Yeah. It would be 0.0 of the portfolio. Yeah. Imagine so, yeah. There was private credit. What were the other things that they considered? debt, non-equity alternatives. Yes. So we- None of those. We don't have any of those. No. No. It's all the money's with equity managers. Yeah. It does have a skew to mids and smalls, which you showed. Yeah. Yeah, that's been, you know, challenging the last month or two. Yeah, that's been challenging. I mean, the other thing to say is that because we're so diversified, our largest exposures typically tend to be 2%-3%. Yeah At most of the whole portfolio. Among those smaller players who have some exposure to private credit, the overall exposure for FGX would be relatively- Miniscule relatively small. Yeah, tiny. We're not aware of any of our fund managers that have like that they don't have private credit funds. No. I think you can. Yeah Safely say there's. Yeah Negligible exposure. Yeah. Yeah. From Gary, "What is the selection process criteria for choosing fund managers?" Maybe I'll just have a crack at that one. We're very lucky in the support that we get in Future Generation Australia, in that the investment committees that I get to work with include some great people, highly experienced people. They're CIOs of superannuation funds, they're fund managers, they're institutional asset consultants. They're highly experienced, highly credentialed, investment professionals. They've helped us to develop a process for selecting managers which is extremely robust. We basically white label, we borrow some of the best institutional asset consultants' processes to help us do due diligence on managers. I spend a lot of time meeting with fund managers, we try and make sure that we're finding the best ones we can possibly find. We then put them through a very extensive, and probably quite painful for them, due diligence process, lots of paperwork, lots of D-Day. They meet with the investment committee at least once. Everybody gets to ask them the questions that they want to ask. We use some quantitative models, which we also get for free, to make sure that if they're a great manager, they may still not fit ideally within the current portfolio, they may not be additive to the risk-return profile of the portfolio. We use some quantitative tools to help figure out the best allocation, if any, and then the investment committee approves that. It's a pretty detailed process to get, and difficult for fund managers to get into, the portfolio. Once they're in there, we meet with them all very regularly. I meet with them frequently, and then when there's a problem or a reason to sort of ask more questions, we get them in to meet the full investment committee. That could be anything from their returns aren't what we would expect, they're worse, either significantly worse or significantly better than we would expect, or there's been some changes within the people managing the money or something like that. They'll come into the investment committee, and they'll be reviewed. We're not per se worried about individual manager performance at a point in time, because we would expect, given our diversification, some managers to do well at some points in the cycle and some to do less well. By balancing it out, we hope to smooth the returns and do well through the cycle. If they're doing something which is not what we had modeled or had expected, we would certainly look in a bit more detail. In terms of how many managers have we had? We've currently got 16 in the portfolio. Over the life of Future Generation, we've changed some managers in the mid-20s. People do leave the portfolio from time to time, and new managers come in, and that's just to optimize the portfolio for what we think the outlook and to get the best balance in the portfolio. We actively manage them. We also actively manage the weights of the managers that we have in the portfolio. You may be a high conviction manager with a large percentage, but we might reduce that at times in the cycle. We also reduce if a manager does really well, their weight in the portfolio will go up. We'll naturally trim that to make sure they don't become too big a part of the portfolio. It's quite an active management. For Matthew from Sarah, "When it comes to the traditional Australian blue chips, do you believe they still deserve blue chip status? Do you hold these? And are there any companies that you think should be treated as blue chips as a staple for a portfolio and maybe aren't? Yeah. It's a tough question. I never kind of grasped that idea what a blue chip is, 'cause every business is a business, as much as they can outperform, they can underperform. They're fragile. Yes. Yeah. Look, there are some terrific companies in Australia that have gone the test of time. The banks in particular, BHP, Rio Tinto, they've been around. Rio Tinto was CRA and RTZ and all these- The same assets over time. The majority of companies have their moment in the sun, and that's why we like being stock pickers, because you try and pick that moment, a catalyst. At the moment, what one of them at that blue-chip level, it got into everyone's portfolio over the last 15-20 years, was CSL, and today it's underperformed dramatically. Stocks like that make everyone question, like Sarah just said, are they blue chips? I would say that you have to be aware of every stock that you've got, and nothing really is bulletproof. There's that idea, put them in the bottom drawer. You know, open them up 10 years later and they've gone up and you've got all the dividends. They're the minority of companies, even at the big ends. You know, you have companies that come from nowhere. Like, look at Goodman Group, used to be Goodman Fielder. Limited all those years ago. A food company that, you know, pivoted into industrial warehousing. Became a global player, and now it's struggling a bit, but it went from nowhere to something. The businesses are very dynamic and changing, so I wouldn't classify anything as a blue chip. 'Cause on the other side. Don't fall asleep on any company. Yeah. Yeah. On the other side. Yeah The green chips that are gonna become blue chips. Yeah. Have you got any of those for Sarah? Oh, right. Tough, isn't it? Yeah, it's always tough. I'm just trying to think. Yeah. Maybe we come back to you on that. It's even. That's sort of what I was. The tough thing is it tends to be a company that's growing very rapidly. Yeah. We know with companies growing very rapidly, there's usually- Well, they. They're taking a lot more risk. You are, and here's the hesitancy in what I say. If you asked most people 12 months ago, "What's our next blue chip?" They'd probably say things like WiseTech Yes Pro Medicus. Yes, yes. These global businesses that have got a niche, huge returns on capital. Yes Growing nicely, and that's what you want. I mean, that's the Buffett Yeah You know, ideology. What everyone wants to find. Well, guess what happened? They've all halved, down 60%. You had a terrific run, and now they've halved. Most people think it's been solidified, this idea that you only need a handful of companies, and Australian investors have changed over the years 'cause they've been able to access foreign markets a lot easier than they used to. Everyone now seems to have Apple, Microsoft, Amazon, Facebook in their portfolio, the Magnificent Seven. You know, in 10 years' time, they all of them might have had terrible decades. Things, the world changes all the time. You know, there was only one company after 100 years that was still in the Dow out of the 30, and that was GE. Mm. We know what's happened to GE. Mm. It's been picked apart since then. You know, 120 years. It basically got dismantled. No, I dunno, it's hard to pick. I mean, I suppose one thing we do know that, you know, in the blue chips, and particularly- They're liquid, I like that. Yeah. You can trade them. You can change your mind. Yeah, looking at Australia. Yeah like, the banks, like, they're just great franchises. Well- You know, you got an oligopoly. Yeah. Four banks. interesting with the banks, the I know they're expensive. The journey since the GFC is quite interesting, right? They used to have higher credit growth, higher returns on their equity, because, you know, they're very leveraged businesses. Since then, the regulators have made them hold a lot more capital, so the returns on equity have come down. They've made them go into residential real estate rather than across the board a lot more, and their multiples have expanded. Against financial orthodoxy. Which you wouldn't normally think- Yeah, it's against it. because it's reducing growth, so the equity Reducing your returns and growth. You think the PE will? They're less risky. Yeah. Oh, okay. Yeah. Yeah. I think that's why you've got a few more PE points out of them. Yes. You know, Commonwealth Bank's gone to three times book. Yes. Expensive around the world, but heavily regulated, dominant in its position, and, you know, it's also, as we learned in the GFC, and I remember having the conversation with Geoff at the time, I said, "Do you think these banks can re-rate because they're government backed? They're too big to fail. You said, "Well, not the equity." The equity can disappear. On the debt. Yeah, yeah, that's the problem. The institution can stay there, and I thought, yeah, you're right, the equity can just evaporate. Yeah not many. Yeah, great. This one I really like. This is again for you, Matthew. You started your career as a journalist. How has that helped you to become a portfolio manager? Well, I started as a journalist, but as Geoff picked up when he hired me, he said, "Oh, you did a law degree. That, we'll go to market with that. Well, A, you did a law degree, so obviously you've got a great way of thinking. Yeah. To me that's a big risk. An economics degree. Yeah Economics law. You actually did have an operating business that you know worked in. Oh. Our strategies business. Yeah, my wife had a cafe. Well, we had a couple of retail shops, so. You understood business. Businesses were interesting. Yeah I grew up on a farm, which is a bad business. But we always talked about business. Yeah, there is that conversation. In terms of journalism, I fell into journalism because there was no jobs for me. I came out in the early 1990s recession, done a law degree, and I thought, "Oh, yeah, journalism sounds all right." I'd never invested in the share market, never had any money, wasn't in the family, but I started reading stuff about the share market. I was interested in economics, and I got a job out at Campbelltown for a year on a general newspaper, which was terrific learning experience, and then got a job in the business section at the Sydney Morning Herald, and that's where I met people like Geoff. It was a new world to me. What did it teach me? There's a couple of things you do get out of it, and there's been a couple of journalists that have done really well. Alex Pollak I know him, yeah. Who Geoff knows. You know, Alex was a journalist briefly. John Sevior, who's now retired, he was a journalist. There's a few of them, and it teaches you basically two things. One, it teaches you as a fund manager, you sit in the middle of a lot of information, sources everywhere, companies, brokers, industry people, other fund managers, and you've gotta distill down to what things are actually important from all that information you collect. That's what a journalist does every day, collects a lot of information, what does the article look like? What are the key points? I like that, sorting information, and I suppose the other thing is you interview a lot of people and you've gotta be skeptical. You know, fund managers always have this excuse, "The guy lied to me," or, "The person lied to me," or, you know, "The company, they're a fraud." Part of your job is to try and pick that up. Yeah. You know? It helps on that front. You are very good at collecting information. Am I? Well, no journalists. Oh, they are? You are too. I didn't think I was. You are too. No, but that's what you're doing, you collect- Yeah, yeah. You're on the hunt all the time for information. Yeah, yeah. 'Cause that's what interests you. Yeah. That, yeah, I agree with that. Which helps in terms of trying to work out what company's worth, what are the drivers for the company's. Yeah Profit. You know, Curiosity and what's going on. Yeah, it's all about that information, isn't it? Yeah. There's a question from Peter, "What is the FGG and FGX annual return since inception?" Well, that's a great question, Peter. You've given me the opportunity to point out that FGX has outperformed over just about every time period, so one year, three year, five year, since inception. Does that answer the question? No, but I wanted to gaslight you first. over the life- Yeah Of FGX, it's delivered 9.8%, I think, is the number, which is about 1% better than the index has done over that period as well. With less volatility. With... Yeah, with- Yeah Over that period, 17% less volatility. You'd expect there to be a direct relationship between volatility and returns. You'd expect it to be 17% worse than the market. Yeah Where it's actually been. 10% better Yeah, 10% better. Yep. Yep, exactly. Could be a study in that one day. How did they do it? Yep. Yeah. Diversification. You need a PhD student. That's right. After deciding on a fund manager, do you also decide- Oh, that's FGX. Yeah To that, it's not. FGG I think is 9.5% since inception. It's a little under. A little bit below the benchmark. I mean, don't wanna go into FGG at the mo- Yeah The global market has been very highly concentrated amongst a small number of companies. Which is a risky position for a low volatility fund to try and. Yeah To try and take. Yeah Yeah. Where was I? From Kate, "Would you consider FGX as a bottom of the drawer stock?" I guess I don't know how to answer that one, Matt. Oh, yeah. Yeah, that's. Yeah. That's kind of what it's designed to be in some ways. Yeah, like it's a diversified portfolio. Yeah. To me, like it can be the top drawer or the bottom drawer. Yeah. In theory, you know, you're taking a medium long-term view. I mean, first of all, you're buying, you know, a dollar of assets at AUD 0.92, so you're getting a free kick of that 8% discount. One day it'll, you know, reflect a dollar or if not, as I mentioned earlier, more than that. It gives you a really nice diversified portfolio of fund managers, that you've got a professional investment committee that's, you know, looking through the data, and works in the industry all the time. Talking to and selecting, you know, people like Matthew at, you know, Centennial, as to manage part of a. There's, you know, in FGX there's 16 of them. Yeah, that. You know, that are spending 100% of their time. Definitely a lot more bottom drawer than an individual stock, 'cause you Yeah that diversification. Yeah. Yeah. Stock picking's difficult. Yeah. Everyone has a go at it, but at the end of the day. Yeah This product gives you great diversity. Yes ... uh, both- Yeah The managers and the underlying assets, so it's terrific. Yeah. Yeah. Really the structure, like, a lot of people think of ETFs, you know. To me, an ETF, if you know nothing about the market and you just want exposure to the market. buy an ETF. If you wanna do a little bit more work, and I sort of call a listed investment company the thinking person's ETF. Is because you can do some really basic analysis, which we've done for you, and told you what the NTA is, and you can work out you're actually getting a good deal by buying it cheaper than that. There is a question here from, I think that's Angel, but I might have that wrong, sorry. Quite likely. Any plans to increase AUM, given there might be an opportunity to purchase good companies at a good price when volatility increases? I guess that's a good one for you, Matt, in the sense that you said you're holding a lot more cash at the moment. Presumably that's partly defensive, but partly to take advantage of. Yep Opportunities as they come up. We look at it maybe over. As I said, we don't like to go too far out. We look at over the course of this year, and what lines up is what things. There's always something going on in the market, so you never get an absolute clean run, but there are moments where things get better. Like I said, last year was when you picked the pivot on the tariffs, 'cause everyone got so obsessed by the tariffs were gonna lead to a recession in the U.S. and maybe globally. Then that changed, and then everyone, the relief factor went bang. That, that's what you're looking at. Maybe the first step there is the situation in the Middle East. As I said, I don't think it's got a long phase. You know, the Americans haven't gone in there with the idea they're gonna be there for years, or so they tell us. Let's hope that ends fairly soon. That's a relief. As I said, then there's the interest rate environment. Earnings and interest rates are the main drivers of markets. Earnings are okay at the moment, but the interest rates are weighing heavy because we're not quite sure how high they go. It affects not only the valuation of companies, but the future earnings of companies 'cause it slows down the economy. It's got that double whammy. That can level out, flatten out, and we don't go into recession. Probably not a bad scenario for the period, as I said before. Add to that, the U.S. will be cutting rates hopefully in the second half of the year. Now, as I said, that can change, but that's the scenario that we kinda think that once we get through this period could be nice inflection point. We would try and invest our money as best we could with the best ideas we've got to take advantage of that. We're putting our Future Gen director's hat on. You know, we're trading at a discount to NTA, so we won't be raising any money at this point in time. If we get to a premium and we're there for a little while, you know, then maybe we will. You know, how would we do it? You know, obviously it's a board decision. Could be an SPP, something like that. You know, they have more capital to give to you guys. The idea is to grow it over time. Yeah, yeah. Which, you know, like when we, you know, it's AUD 620 million of assets now. When we floated it initially it was AUD 200 million of assets. Um, yeah, so in theory- You know, to grow. I guess, I mean. We need to get to a premium, so. The other opportunity, I guess, for active managers at the moment is there could be quite a good setup here in the sense that markets are being quite concentrated, big divergence between PEs of some companies and others. It's kind of could be classic active management kind of territory pretty quickly. It could be. What I like about active managers is generally what goes up for a year, everyone eventually owns that. Yeah. Yeah, yeah. It is. Yeah, the active manager or everyone? Oh, the active managers, yeah. Normally they eventually 'cause the market draws you in. You have to. Yeah. If you're gonna perform, you're in that. If you're small enough, and that's what we pride ourselves on, you know, the idea is to stay around that AUD 300 million mark for the small cap, mainly small cap Australian. You can pivot quickly enough to go somewhere where you need to be. You know, hopefully that delivers pretty constant returns or consistent returns, yeah. There's a question from Mark which, I feel is gonna give Geoff the opportunity to increase my KPIs, but anyway, I'll ask it. "The vision for Future Generation was to get to AUD 100 million in donations by 2030. You're already there, five years ahead. What's next? Well, it's funny, when we got to AUD 100 million. You know, the tough thing is, you know, you think AUD 100 million is a big figure. Well, when we created Future Generation, what, 10 or 11 years ago, you know, we thought if we raised AUD 20 million, so it means we'd be giving AUD 200,000 a year. Yeah. Yeah. That was one of our goals. When we, you know, when we got bigger, we had a bigger. I know I shouldn't probably say it, but, like, yeah, you gotta say a billion, don't you? Well, yeah. Let's do it. Let's do it. That's gotta be like, in theory, these entities have at some point. Hey, it mightn't be in my lifetime. Yeah. What am I? Yeah, 68%. Dad made it to 87%, so I think I'm about. I'll get 95%, 96%. I gotta. I don't know if we'll get to giving AUD 1 billion away by then, but that'd be nice if we had. Yeah, I think. Let's just incrementally- Well, to me, it's not about giving it away or, sorry, giving, you know, donating the money to the charities. I know we're talking about investing, but if anyone who's invested, look, you know, we've got shareholders on, so thank you, because you're all making this possible, and everyone here is making it possible. You know, when we set this up, I think, you know, if we could just save one person's life, and it was, you know, children at risk, youth mental health, you know, there are enormous problems. You know, they get worse. You know, we talk about technology and investing, and that's great, but we all know, you know, the negative, the downside impact of that. We've all probably had personal, you know, or ourselves or seen it or with friends. To me, like, just hope, you know, that luckily we've had the generosity of everyone that's been involved to create an investment vehicle that may have saved someone's life, and if it has saved one person's life, then, you know, we've succeeded. Yeah. I reckon in addition to that, if I just put my investor hat on, that Geoff Wilson and I learned this a long time ago, was that people like to be involved with growth stories. It doesn't have to be extreme growth done taking too much risk you know, the Future Generation vehicles are a growth story that you're gonna grow the business That's good to be associated with. I remember years ago. We kept buying back stock in the Wilson products. At the end, people wanted to see a growth story. Yeah. Yeah. It's good for investors. Yeah. A question from Amy, "I'm new to Future Generation and thinking about buying shares. Can you explain how it works?" Well, it's really easy to buy shares in Future Generation. They're traded on the ASX, so you can buy them through any online broker or through any high touch broker, full service broker that you're aware of. If you wanna not pay brokerage. If you wanna not pay brokerage, which, a lot of people don't want to pay. Mm. I say that as a former broker. CommSec rebate your brokerage when you buy Future Generation, so another little incentive to use them. There's from Bill, I think- Oh, yeah, you just buy shares. Just buy shares. Buy shares on the stock market. You can sell them whenever you want to. The code FGX for the Australian one. If you want global equities, it's FGG, depending on what exposure. Yeah. You get a fully franked dividend on a six-monthly basis. Exactly. And as part of our philanthropic efforts, you get also to have a say in where the donations go. You can look through on our website the not-for-profits that we're supporting and vote which one you'd like to be supporting. Question from Bill, "Matthew seems bullish at the moment. Geoff is often bearish. What's Geoff feeling at the moment? Yeah, I'm old. Am I now? To me, it's all the second order effects. Yeah. Particularly, you know, the run on the private credit. To me, that's gonna be fascinating. Mm because, you know, the unexpected consequences of what that'll do in terms of, and my sort of, you know, what I've seen over time is when people gate, you know, stop you from redeeming, it tends not to be a good- No, no. You know, end result. One is, like someone who's quite topical at the moment, Bill Ackman, you know, who's floating his management company. Mm at the same time as doing an LIC. If you check in the last couple of days, he launched the prospectus. For his management company? For an LIC. Right He couldn't get away last time, so he's putting some of the management. He's doing what Robert Luciano did with VGI, you know, at some of the management company. Like a staple. Yeah, stapled it. Yeah, stapled it. Yeah, to get people to put money in. Mm. Like, I remember going and seeing them. This was when, you know, the Pershing Square, which is his management company, you know, gated people. Oh, yes, yeah. I don't know, I can't remember if they had AUD 6 billion then or AUD 8 billion or AUD 9 billion. I was looking. I was reading the prospectus the other night, AUD 900 million they've got in that fund. He's got his listed investment company, which is listed in Europe, which has got AUD 15 billion or AUD 16 billion or whatever it is. You know, when you gate things, and so you've got all that, you know, the billions of dollars that's created liquidity for certain companies, you know, I'd like to see what the negative end impact of that is. I mean, there's no doubt the war will finish at some point in time. You know, I know our guys, Matthew and Damien, think it'll next week or so. I know you were saying next couple of weeks. We've seen by the oil price that it's saying, you know, things are gonna change. You know, it's fallen from, you know, the peak it got to. You know, obviously there's the inflationary, the negative impact of the inflation. You know, that's gotta play through, and then to what extent the market's gotta look through that. Yeah, so to me, you know, I'm just, I'm a little more. Well, Matt, you've got 25% cash. Yeah. Yeah, at the moment it's tough, yeah. Yeah. I'm kind of looking at 2, 3, 4 months. Yeah. There's no doubt what's happened in the Middle East. The war could end. Yes. It might take a little bit longer because there's more than one player. Just because the U.S. says it's over, it doesn't necessarily mean it's over. Mm. There's also a lot of damage been done. Yeah. I'm no expert, 'cause we haven't seen this quite happen before, but they've got to reboot a lot of the production. Mm. Could take several months. As long as the market knows that's happening. Yeah, it's factored in. They'll be patient. Yeah. Yeah. Yeah. The private credit stuff, let's just hope that I haven't got a lot of faith in U.S. regulators. They're pretty loose. Mm. Let's just hope they're getting on top of that and they're tightening everyone up, because we've had the canary in the coal mine. Mm. A couple of cockroaches run out, as they say. Mm. Yeah, let's get back to normal, transmission hopefully. Was it Bill's question? Yeah. What I have learnt is that I know Katrina, who runs our global fund, you know, gave us all a book that showed, I think, over a 20-year period, it looked at the U.S. market, and if you hadn't invested, if you missed the best day a year for 20 years, so it's only 20 days of performance. Mm the market over that 20-year period, if you'd just invested at the start of the 20 years and at the end of that 20 years, you'd have made about 8% per annum. If you missed the 20 best days, your return, you'd have made no return. Whatever the money you put in at the start was the same at the end. Even though, you know, you can feel negative today and you think, "Oh, I might, should sell everything" what does the average investor do? You know, Matt talked about it a little earlier, is the average investor gets about half the market performance. The market does about 10% per annum, the average investor gets 5%. Because what the average investor does, he tends to buy when things are going really well, and sort of when things are tough now, he tends to sell. Yeah, so to me, what have I learned? Is it market timing, you know, or time in the market? It's time in the market. There you go, Bill, there was some optimism there from Geoff Wilson. You might want to record that. Yeah, yeah. Don't listen to what I've said, Bill. Just stay invested. Yeah, that's fantastic. Well, I think we're at time there, so we might thank everyone for joining. Just a couple of things to highlight. I think Geoff mentioned Bonnie in his opening remarks. Bonnie's joined us as General Manager in Future Generation. She's been with us about a month, I think, now. She'll be coming on the roadshows with me, so she joined us from the Packer Family Foundation. She's extremely well-credentialed and you'll be seeing a lot more of her. We've got some roadshows coming up, they're on your screen now. We'd love to see you at any of those. You can register using the QR code or from our website. Before we say goodbye, just like to say thank you again, Matthew Kidman, for joining us. Thanks for having me. for having me. It was a lot of fun. Yeah, it was good. Yeah Good to chat. Great insights. Good to see you. Yeah. Thanks. Geoff as well. Thanks. Thank you all for joining us. We'll see you next time.