Hello, welcome to the Future Generation Australia half-year webinar. Thank you for taking the time to join us. I'd like to start by acknowledging the traditional owners of the land where we are, and pay my respects to elders past and present. I'd also like to introduce you to the guests that we have today. To my right, we've got Geoff Wilson. Probably doesn't need an introduction, but on the off chance there's somebody online who doesn't know Geoff was the Founder of Future Generation. He remains our biggest supporter, and he's on the Board of the Future Generation Australia company. He's also on the investment committee as well. Thanks for coming in, Geoff. Thanks, Lee. We've also got- Good to be here. Nice. Yep, great. In the sunshine. We've also got Tom Richardson here. It's been a tough year for active Fund Managers, but Tom has continued to do really well. He's the Portfolio Manager for Paradice Equity Plus portfolio, and has been a major contributor to our performance for a long time now. Tom, thanks for taking the time to come and see us as well. Thanks for having me, mate. The agenda today is, we're going to talk a little bit about the results. Geoff's going to talk through the dividend decision, which we announced a couple of weeks ago. I'll give a quick update on the portfolio, and then we'll have a bit of a chat with Tom about markets and stocks, and see what he's seeing. Before we start, there's a disclaimer on your screen now, which essentially says that anything that we say today is general and advice only. There's no personal advice that we are giving. With that, Geoff, we can say whatever we like now. Absolutely. We announced an increased dividend- Yeah. ...a couple of weeks ago. Would you mind explaining the Board's- Yeah. ...kind of thinking there? Yeah. Obviously sitting on the Board, and Lee, you being at the Board meeting- Yes. ...on top of it as well. If you look at how FGX has performed, and I suppose you look at it from a shareholder's perspective, and you look at total shareholder return, and that's what the share price has done, plus the dividend you've got, and I think we've added in the value of franking. Yep. Over the last 12 months, they've made a little over 20-odd%, which is a very solid return. Part of that return is the fact that the FGX shares were trading below what the true value was, and now they're trading a little bit above what the true value was. We'll talk about that a little bit later. Also, the Board thought, "Look, let's come out early, and announce the dividend," just to give shareholders clarity. That was, what was it? The AUD 0.038. Therefore, the 12-month dividend is double that. Is AUD 0.076, and a yield of, what is it? Just a little under 6%, but that's fully franked. Yep. If you gross it up, if you're in a super fund and you're getting the refund back, or if you're in a low-tax environment, then you're talking about, what is it? 7.5%. Nearly 8%. Nearly 8%. Yeah. I've seen some questions coming in, but we'll talk about a little later, in the new taxing regime where capital gains have sort of become a dirty word, income is what people are looking for. As a significant part of their return, particularly franked income. To me, I think that'll go really well for FGX. In terms of our ability to keep paying that dividend, the last 11 years, there's been a consistent dividend increase. The fact that there's still strong retained earnings, strong profit reserve, so for the ability for the dividend to keep going, I think it's got five years. Was it five or six years? Five and a half years, yeah. Yeah. Of profit reserve there for the dividend to continue to be maintained at this level, or if the Directors see fit to continue to increase it. Still some franking on the balance sheet as well. Yeah. Yeah. Yeah. That's right. Yeah. Still a little bit of franking. Yep. Fantastic. Well, thanks very much for that, Geoff. I might give a quick update now on the portfolio, just to remind everyone what our objective is with Future Generation Australia, that is to deliver market or better returns, but to really manage the volatility of the portfolio. I think we've mentioned previously on webinars that our portfolio has a bit of a skew towards medium and smaller-sized companies. You can see on the screen that we're a bit underweight the top 20. The top 20 are a big chunk of the Aussie market. They're over half the value of the All Ords. We're a bit underweight those. We're a bit underweight the next 30 companies as well, and we've got this bias towards medium and smaller-sized companies. That's where we think managers can add a lot of value. When you look at our volatility, you can see that we've actually managed to keep the volatility much lower than that of the market. The volatility of Future Generation over its life has been about 15% or so lower than the All Ordinaries, and about 30% lower than the Small Ordinaries, so the smaller company index. Over that time, as Geoff mentioned, the portfolio's actually done pretty well. We've beaten the index by about 1% over the last year, and three years, and since inception. The performance has been steady, strong, and the volatility's been low. The way that we've achieved that, and we do talk about this quite a lot, is to make sure that the portfolio is appropriately diversified. Our model, as you may know, is to find great fund managers, we've got one of them here today, to ask them to work for us for free and for you for free. Because we and you are not paying them fees, we're able to give 1% of our assets each year to some great not-for-profits. We get those fund managers, we give some money to the not-for-profits, and we're able to give that money without having a negative impact on the returns that our shareholders receive. In fact, we actually save more from the fee savings that we have than we donate. That's the model. The trick to the portfolio is to build diversification across the managers that we employ. We've got, on the screen, you can see the managers that we have there. They're what we think are the best active boutique fund managers in Australia. We are very grateful that they work for us. It's extremely generous. They're diversified. There's obviously a lot of them. There's 16 of them. They're diversified in the ways that they invest. We have long-short managers, we have long-only managers, small cap, large cap, activist, systematic managers, all working for us and having different ways of investing. That's the diversification that we aim to achieve. You can see from the pie chart on the right that at the moment the portfolio has a skew towards absolute return strategies. Maybe just a word on what absolute return strategies are. The long equities that we've got there, they're managers who are looking to buy shares in the Aussie market that are going to go up more than the market itself. They're trying to achieve performance which is relatively better than the benchmark. The absolute return managers have a few more levers at their discretion. They can hold more cash, they can sometimes take short positions, or they are able to have a bit more flexibility in the way they invest. That gives them more opportunity to perform, and importantly, it also gives them the opportunity to protect capital if we do get a market wobble. Our current portfolio is roughly two-thirds in the absolute return strategies and 1/3 in the long-only strategies. If I look at how the portfolio's positioned from a sector perspective, obviously our fund managers are selecting the companies in which we invest. Our portfolio is not, through that diversification, mirroring exactly what's going on in the index. It's taking some pretty active positions. As you can see there, our managers have had a fairly significant underweight to financials. As we said, we've been underweight the top 10 companies, the top 20 companies in Australia. We've been quite significantly underweight financials. As you can see from the chart on the right, which is the 10 largest companies in the ASX, we have underweight positions in all of those. Not because we're taking a specific view on those companies, but we think the diversification that we can offer more broadly across the market gives us a better chance of meeting our objectives. Active positions are taken within the portfolio. As I said when I talked about the model, the real reason for doing this, aside from generating shareholder returns, is to be able to make some impact and social good. Future Generation Australia supports vulnerable children and helps them to thrive. As you can see, there's 11 not-for-profits that we actively support. Last year, we donated, I think, AUD 5.7 million to some of those charities, which is a pretty significant contribution. Sometimes in these webinars, we've had our not-for-profit partners to come and talk to us. We're actually going to separate that out. You'll be receiving an invite in the next few weeks about a webinar which my colleague Bonnie will host, where she and Jennifer Westacott will interview some of those social impact partners to explain the kind of impact that we're having and where they see their challenges. We're supporting some pretty amazing causes, and you can learn more about them either from our website or at that webinar. As I said, we are able to donate significant amounts of funds to some of these great social impact causes. Over the life of Future Generation, AUD 100 million has been donated. Roughly AUD 49 million worth of that has been donated from Future Generation Australia, and I think it was AUD 5.7 million that we donated last year alone. We are significant contributors to those social impact causes. We donate to them on an untied, multi-year way, which gives them real flexibility and support, and we're very proud of that, and our shareholders should be, too. That's the portfolio update. Tom, might turn to you now. As I said, one of our many generous fund managers working for free. Super grateful that you do that, thank you. You've had a great year. Actually, you've had a great several years, would you mind just explaining how you invest, how you look at the market, your process, and your philosophy? Absolutely. Unsurprisingly, our ambition is not dissimilar from Future Generation Australia. What we're trying to do is outperform the ASX 200 year in, year out, quite consistently and with low volatility. That's what we're embarking to do. Now, the one thing that is a little bit unique about the strategy that we're responsible for is that we are able to take short position. What that means is that we will short sell a little bit of our investors' money and reinvest those back into more longs. For AUD 100 that you give us, we might have AUD 150 exposed to the market, and that might be 125 long and 25 short. We're just creating a little bit more opportunity to hopefully make some money, which is important in a concentrated market like Australia. Ultimately what we're doing there is just trying to find some stocks that will underperform, reinvest those to stocks that will outperform, and hopefully outperform the market. If you look back over the last year, maybe longer, what are some of the themes or the positions that you've taken that have helped you to navigate them? It's been a really volatile difficult market, very narrow themes, and in terms of the stocks. How have you navigated that? The last 12 months is very fresh in mind, mate, I can take you through that because we were going through that- Yeah. ...a couple of weeks ago, it's pretty remarkable. If you think about the top 100 companies in Australia, I think 14 out of the top 15 stocks were material stocks- Right. ...commodity stocks. I think AMP was the only one that was not a commodity stock. If you didn't own commodity stocks in the Australian market for the financial year to June, you had a tough year. It's pretty much as simple as that. Most of these stocks are up 60%. I think Pilbara Minerals might have been the top performer at over 100%. On the flip side, we had WiseTech down 70%, Xero down 60%, [SEEK] down 60%, Cochlear, CSL down 50%, 60%. These are household names. The divergence that we saw in the financial year to June was wild. Fortunately, we were on the right side. We were a bit overweight in the commodities sector, and they were definitely our winners. We avoided some of the big blow-ups. Unfortunately, we did have a couple of the blow-ups, dragged on a bit of performance. The reality is, over that 12 months, that was the key to our performance. Yeah. Interestingly enough, if we look at a three or a five-year view, the sectors that have worked have clearly changed, and I think it's a really important feature of our market. The concentration is very large, as we know, with banks and resources, but it's also a very highly cyclical market. In our view, it's not a market where you can set and forget. You need to be active because what works one year does not work the next. I think fortunately, over the last three to five years, we've been broadly on the right side of some of those trends, which has helped performance. If you look at just taking that one step further, if you look at banks and miners from here, there's obviously a lot going on with the banks, specifically. Housing being kind of front of mind for a lot of people with mortgages. Banks and miners, do you have any views now as to how I think I was reading that you're probably a bit more cautious on banks, but how are you thinking about that from here? Well, yes, there does seem to be a little bit of divergence between the current housing market and CBA share price. Yes. Yeah. Which I think is [AUD 190] and nearly all-time highs today. We think the risk-reward is unattractive for the banks. I think that's largely a consensus call, so we're happy to take that position. We're underweight the banks, and obviously saw the sector positioning earlier from Future Generation. Sounds like we're aligned with a few of the other managers. Yeah. Hopefully we're on the right side of that at some stage. The results season will be interesting to see. Got a CBA result out in a couple of weeks, and we'll get an update from the other banks. Broadly underweight the banks. We don't see them as good money-making opportunities. The miners are a little bit interesting. As we said, last year we did well being overweight that sector. We've actually reduced that overweight, and we have a small underweight. The reason there is the commodity markets, we see commodity markets sort of broadly fair. We don't think they're breaking out from here. The stocks have done very well. They've rerated into that, and there's a bit of cost pressure. The risk-reward is a little bit less attractive than it was sitting here 12 months ago, so we've reduced our exposure. Ultimately, again, similarly to Future Generation Australia, we're looking outside those two sectors for where we think we'll make money going forward. Mm. Where is that? As you say, outside of those, the classic growth stock that people went to was CSL which had a really tough year. Yeah. It hurt a lot of people. Yeah. How do you think about getting outside of those, or where do you go? Is it just looking at sort of medium-sized companies and more different industries? Yeah. We're underweight the top 20, but we're actually overweight the next, the 20- 50. Our benchmark is the ASX 200, we want to be alert to that. Ultimately we're looking in other sectors. Healthcare looks interesting for the first time, in our opinion, in a long time. The fundamental valuations are attractive. Some of the companies are still working through issues, and you can see that in the share prices, trying to bottom, and we might touch on a couple of those later. Some of the growthy names, the tech companies have been hit in the AI trade very hard. We think there's opportunities in there. It's really a sector opportunity set rather than necessarily a size bias. It's just a manifestation of the top 20 is largely banks and resources. When you look at the kind of concerns that are being raised in the press, inflation, growth, budgets, all those things that are dragging on Australia, is it valuation then that's throwing up some of those opportunities? Is it that there are sectors now which have been punished sufficiently well or are avoiding some of those headwinds, but have been sufficiently attractive to invest in? Absolutely. When we think about the aggregate market, we don't want to make forecasts, but there's not obviously a lot of upside in the top 20, which is obviously why we're underweight, as you are as well. We do see a lot of opportunities in our portfolio. When we look at some of these stocks, which are down 60%, and we see good earnings growth, we do see opportunities to make money. It's less driven by the macro backdrop, which is fairly difficult at the moment, and ultimately the share price opportunities that we've been presented with. Mm. Now, our investors love to hear about specific companies. Yeah. Are there any that you're prepared to share that we're not going to impose on your own intellectual kind of property too much? It would've been good if we had this yesterday, and Rio was one of them. Yeah. I know at one stage their result came out, they're up 5%. CSL up 7%. 7%. I should've said that this morning. Yeah. Would've been a very cool call. If you do these pre-market next time. Yeah, yeah, exactly. It's delayed, right? Yeah. It is interesting though. I'm not trying to be too risque in these sort of webinars, the healthcare sector does look interesting. It's interesting, everyone's familiar with the drawdown that we've seen in our healthcare names, and the challenges that CSL's had- Yeah. ...the challenges that Cochlear's had. If you- Drawdowns for when the share price has fallen- Yeah. ...significantly. There's clearly challenges with those companies. Yeah. You look at a company like ResMed, which hasn't had the operational challenges, but their stock is also halved. It's actually been a global phenomenon. We've felt it pretty hard here in Australia because there's- Yes. ...some of our true champions are healthcare names. This is a global story where this sector has been sold for the better part of two or three years. There's a number of reasons, but one of the main ones, in our opinion, is really it's been a funding source. The only game in town in terms of global investment is really the AI trade. Yeah. Everything else is funding and investment into that. Yeah. What we're seeing at the moment is the markets start to question some of those trades. Trying to get over our skis in terms of predicting what that will be in a three-to-five-year view. Certainly, in the short term, the market's starting to say, "Okay, well, maybe we'll take a bit of money out of here and put it into something that's fallen more." That's corresponded with, ultimately, valuations that fundamentally look attractive. The healthcare sector more broadly looks interesting. Within that, we like Ramsay. It's a pretty boring name- Yes. ...as I'm saying, don't fall asleep on me. [crosstalk] A really sexy name, like Ramsay. Yeah. No, I remember when Paradice started your business in the old days, 25, 26 years ago. Yes. It was Ramsay, and I think it was trading at, it could've been AUD 0.80, or like It was exciting then. Well, everyone thought it was boring then. Well- What did it go to? I think Ramsay compounded at something like over 20%- Yeah. ...maybe 25% for 20 years. Wow. CSL was the same. Yeah. Obviously, it had a big drawdown, got over its skis in terms of investments offshore. New management team's been on Board for a year and a half, and sometimes these turnarounds can take longer than you expect, and longer than you hope. Particularly in a big company. Of course. Yeah. We think they were one of the first healthcare companies into the downturn, if you think about. Yeah The challenges post-COVID. They're starting to emerge. We're seeing some positive signs, a bit of margin accretion, really pulling back to their core. Management team's focused on returns, which we think is the right thing. We've seen in the past these sort of stories can give you a bit more upside than you might expect, as you reinvigorate the core business. And lose some of the slack. We think Ramsay looks asymmetrical. We like the name, basically. Yeah, brilliant. Well, you mentioned sexy trades. The sexy one's AI. Yeah. Obviously more of an offshore- It is. ...an offshore thing, and there's question marks over CapEx and however extended the cash flow of some of those companies are. Australia's probably a bit narrower in the opportunities for AI. Is it something that you actively try and invest in or see opportunities in Australia? Any views on how that might play out? I think the opportunity for us, really, is that there's been a lot of stocks in our market which have been hit very hard on AI fears. The SaaSpocalypse is the biggest trade, and these stocks, some of the ones that I mentioned, Xero and WiseTech are down 60% or 70%. A lot of it on fears around the AI disruption. We ultimately think that AI's a wonderful technology, but it may not disrupt these businesses in the speed that some of the market is starting to price. Ultimately, as an Australian investor, and we only really have the benefit of investing in the Australian subset, and so we don't have some of these wonderful opportunities that some of the international investors do. Our opportunity is to really take advantage of the mispricing in some of the businesses that are feared of being disrupted. We think that's also where we can see some opportunity within Australia. Fantastic. It is interesting, because when you're talking about that, it reminded me a little bit, for the older people, the tech wreck. Yeah. I know this is totally different- Yeah. ...some of the companies that were sold down just significantly after that- Yes. ...which were good companies- That's right. ...good businesses, and ended up doing exceptionally well. Yeah. Yeah, unfortunately, there's these pain periods, and the real challenge is trying to work out the ones that are going to bounce back, isn't it? Agree. Timing's always hard in these sort of things. Yeah. It can be difficult, but when you look at the absolute valuation of some of these businesses, they're starting to look attractive. Yeah. Particularly- Yeah. [inaudible] Of course Things like that. Yeah. Yeah. There's quite a few investment-related questions coming through, which look quite tricky, so I'll be forwarding those to you in a second. Before we do, you work for Future Generation for free. You have done for years. It always amazes me that people in our industry are prepared to do that. Could you explain what drew you to Future Generation, and why you're happy to support it? We've been involved for a long time. Since the start. Correct Geoff. Yeah. That's been a great window into the process. You think about investing, it's like idea generation and then execution. In my view, as an outsider, with what Future Generation has created, that's what's happened. The idea is obviously a great one, Geoff, the execution has been flawless. We've seen that, really, I've had the benefit of seeing that close up. That's really the discipline with which the team goes about its diligence around picking social impact partners, and then the benefit of meeting a lot of these social impact partners who just are very clear in terms of the difference that that money can make. The longevity of the funding, what that means for them, and just the change and opportunity it can create. We feel that we're a small cog in it, and ultimately, frankly, been very lucky to be a part of it, because it's very impressive. Oh, we're really grateful that you have been. I might turn to some questions from the people online. Thank you for those questions. If you could keep them coming, that would be great. We'll get through as many as we can, and we'll follow up with those that we don't get to. The first one on my screen here, and you have to forgive me, I've got the wrong glasses on to really read these, but I think it's Paul. He's talking about the collapse in discretionary spending, loans, New Zealand residential property market crashing, Aussie residential property bubble also seems to be deflating. How does Future Generation deal with their portfolio as a manager selection and cash holdings, and how are the underlying managers refining their investment strategy, the potential of negative performance over the next few years, given that backdrop? I might just start with the Future Generation part of that question, Paul, is that we leave those sorts of decisions to the fund managers. We try, and I showed a slide before that showed that we've got 2/3 of the portfolio in absolute return managers at the moment. The way that we try and manage risk is through diversification and making sure we've got what we think are the optimal mix of fund managers for the current market environment. The fact that we've got some managers, like Tom, who are able to take a bit more defensive positions when the opportunities are there to, it probably reflects the investment committee's view around that. In terms of the risk of there being a negative return over the next few years of the Aussie market, I don't want to take that on d o either of you feel like- Oh, is that one of the questions? Yeah. What's the probability of a negative performance over the next few years? From a Future Generation perspective, we are built to manage volatility, to manage downside risk. Risk is the first thing that we think about. We would hope that in a softer market, we would be relatively well-placed to deal with that. Tom, is it something that you think about, like broader market-type concerns, people with maybe a wealth effect that sort of causes people to take money out of the market? Tax changes might- Yes. ...result in that as well It could easily be a very tough period. I'm not sure how old the person is who's asking the question, but Oh, I'm probably the oldest in the room, are I? Oh, no, Geoff. No. Oh. Are you older than me? I'm 51, Geoff. I'm older than Tom. The market tends to adjust, and the market looks forward. I think in the question it talked about the consumer, what's happened the last couple of months. You saw the Myer result yesterday, and they said the day before their sales were down, I think in May they were pretty much flat. In June, I think they were down 5%. In July, they were down 4.6%. If you're a retailer and your sales are down that much, particularly they were probably halving sales to get their sales volume up, that's pretty brutal. With property, who knows? We know that Australian property's been overvalued for years. Now the fact that demand side's changed, where's the bottom? What you do find is markets tend to adjust reasonably quickly. I wouldn't necessarily expect There could be one bad year, and you tend to find that, what is an equity market? It's made up of bull markets and bear markets. A bull market lasts for, actually, I haven't looked at the average recently, but for a number of years. Where a bear market tends to go for a year and a half or a year. Mm. Yep. To me, the pain, you sort of go up in the escalator and down in the lift. If there is an adjustment in the market, it tends to be quite swift. In terms of being professional investors, that just creates opportunities for you. As Tom was saying, some of those tech names, the concern about AI, they've fallen 50%+ some of them, isn't it? Yeah. It's been quite brutal. Do I expect there to be negative returns over the next two years in the Australian market? I don't see that. Do I see there to be enormous adjustment in the Australian market? You talked about tax. Particularly over the next 12 months, I think people don't realize, don't fully understand the capital gains tax on Australian business and on Australian shares, how they're going to have to readjust their portfolios, and the asymmetry of having a portfolio of shares rather than having it in a pooled structure like an LIC or an ETF or a managed fund. It's effectively pushing everyone, the 7.7 million Australians that have shares outside of super, it's pushing them away from owning shares themselves. That's a big adjustment. In terms of companies, how they pay out their earnings they make. There's enormous change there because in the old system, before the new capital gains tax, which is effectively a doubling, but in real terms. People wanted capital. If they wanted a return of, say, trying to get 10%-12% over time, you'd want most of that as capital. If you're a student or retired and didn't work, and you didn't pay any tax, your marginal tax rate's zero, you're paying half of zero. Your capital gain was all in your pocket. If you're a maximum taxpayer, your capital gain was 23.5%, is the highest capital gain you paid. Your return, you wanted most as capital. These days, we'll probably come back to this a little later, where does Future Gen fit in this? I think there was a question you were mentioning- Yeah. ...about that. Yeah. These days, now if you're a zero taxpayer and the company makes money and pays tax and doesn't pay it out to shareholders, you're effectively paying a 51% tax rate because you get double tax to 30% on the money it makes, then the 30% on the 70%, because it doesn't pay that out to you, so you get the capital gain and you've got to pay another 30% on that. Yeah. You're paying 51%. If you're a maximum taxpayer, the 47%, you're paying 62.9%, because you're paying the 30%. If it doesn't pay out, you're paying 47% of the 70%. Capital is a dirty word, and so what it'll do for companies need to pay out 100%, all the money they earn, the incentive will be to pay 100% to shareholders, not invest back into the people that work there, not invest back into your business. If you pay 100% out to the shareholders, like the 30% tax rate, the 70% you pay out to shareholders, if you're a zero taxpayer that's fully franked, you get the 30% back so you pay no tax again. If you're a pensioner or a student, and if you're a maximum taxpayer, the maximum you pay is 47%, not 62.9%. Capital, the whole Unfortunately, it is just such a mess that the government is creating. This is going to play out. It doesn't come in until July 1st next year, so as people sit down with their financial planners, as companies look at all those numbers and read the research and understand how they've got to allocate the earnings or the tax paid earnings, there'll be a whole lot of adjustments. What does that mean? It means it's probably good for larger, stable companies that can pay out fully franked dividends. It's bad for the really small growth companies, but in a relative sense. A small growth company can grow at, okay, it might only grow at 300% rather than 500%. To me, there's a real big puzzle that's going to have to be sorted out. All I know, unfortunately, from the Australian economy's perspective, it's not positive. It'll adjust. To me, the great thing about the market is there's always opportunities. We did a webinar, this is a slight tangent, we did a webinar with Phil Lowe and Jennifer Westacott in this room not that long ago to talk about some of this stuff. You're obviously leading the voice in pointing out some of the weaknesses in the legislation. They were also quite vocal about the impact on productivity, growth, entrepreneurship, all that kind of stuff. Yeah. It is obviously a major concern, and I imagine from a market perspective, are you thinking about how that might impact things like consumer discretionary stocks? I think that's probably what David was alluding to, consumer discretionary stocks, housing market prices, the wealth effect, credit growth, all that. Has that formed part of your thinking at the moment, Tom? Yeah, absolutely. We saw Myer's result. Our feedback is its retailers have had a pretty tough July. As you expected, the weather's compounded that as well. It's also compounding a rates backdrop, which is difficult. When you think about some of the discretionary spend, and at least the discretionary stocks, they really peaked in October last year, and that's when we had that surprise inflation print, and they realized that we were not in a rate cutting cycle, we're in a rate rise cycle. We've had three rate rises at the start of this year, and stocks like Harvey Norman, which is a bit of a bellwether, went from AUD 7.50- AUD 4.50. Stockland went from AUD 6.50, this is October last year pre-budget and pre-tax changes, down to AUD 4, [SEEK] AUD 28-AUD 14. The bellwether cyclicals within the Australian market had already suffered a lot, obviously the budget has compounded that, obviously working through that at the moment. The last thing I'll add, which Geoff already highlighted. Is the market is forward-looking. Some of these changes may change the rates backdrop, so it's not always as simple as we'd like it to be. No. Silver lining to- Yeah. ...every cloud imposed by politicians. Just to keep going on this theme, there's quite a few questions. Stuart's one is on my screen right now about the impact that the budget will have on discretionary trusts. Does that impact Future Generation Australia? I think that the short answer is- Well, yeah. ...not in the headlines. No, it doesn't. Well, actually, it's like the individual fund managers that manage the money on our behalf, there's no impact on them. In terms of Future Generation, the listed entity, FGX, is a company structure. It's a company structure that if you're looking at a 10%- 12% return over time, the grossed up yield is nearly 8%, so you're getting a significant amount of that as income. Ideally, what you want as an investor, if you're going to get, say, a 10%- 12% return, you want the capital growth to be in line with inflation, so you pay no tax. Yeah. Yeah. You want the rest to be as a fully franked dividend. Future Gen, we saw it with a WAM entity. We had a capital raising with WAM Income Maximiser yesterday, there's been a lot of demand for that. We were looking at raising about AUD 150 million, we had over AUD 200 million of demand. We had to close it early. It was meant to go over two days. We closed at the end of the first day, early on the first day. There could've been a lot more demand. We've seen in ETFs, people are looking for income. I think ETFs in June, it was normally AUD 860 million, I think, was the highest before, and it was AUD 1 billion. In flows. Yeah. In flows, yeah. It was all into high-yielding products. For people that are watching this, be careful about going to too much yield because you've got to remember, if it's too good to be true, it's too good to be true. There have been some instances in Australia where people are going for yield, and they don't quite understand how the company's giving them the yield, and then the company doesn't exist eventually. Yeah. In terms of FGX, everything's positive. The managers are still where they are. Their structures are outside the tax changes. Yeah. There's a few that have come through also on dividends and NTAs. Stuart's asked about why we don't publish weekly NTA reports- Yeah. ...which maybe that would be a great thing to do. Unfortunately, a number of our managers, they only report their performance and their numbers monthly, so we don't have the ability to do it more frequently. They asked us that from a Wilson Asset Management perspective as well. We do monthly, but we've held off on that, because in theory, you can pretty much guesstimate what the NTA is. If you look at the last NTA and adjust it by the index, depending on Australian or global. I've seen other listed investment companies that do daily NTAs. I know some of the big ones, when they went to big discounts, they went from monthly to weekly NTAs. It actually doesn't help your discount at all. In theory, to me, we don't want to get traders in there. We don't necessarily want to encourage people to be trading for AUD 0.01 or AUD 0.02. If they're happy with the managers, to me, that's your decision. It's like buying a company, isn't it? Yeah. You're happy with the management, you think the company's cheap, you buy. We want them to take a medium long-term view. Just further to that on the dividend frequency. At the moment, effectively the buzz is monthly, and that's why, with WAM Capital, we created WAM Income Maximiser, which has grown. It's tripled in size since we started, so there's a lot of demand that's for monthly. That is an option for Future Gen. We haven't seen a reason to do it at this point in time. It is more costly. It's not disproportionately more costly, but it does cost more. I actually do like the six-month, this dividend and that dividend. With the monthly, the protocol is pretty much announce three at a time and do rolling threes. Right. It's just another. Yeah. Just another protocol that. I think. That's what you'd have to be doing. You'd be doing it. That's not going to work there. Shit. Sorry. So- I understand the logic I think the second part of Dave's question is, how many more dividends will be paid over the balance of financial year 2027? The one that we've just announced a couple of weeks ago will get paid, I think it goes ex on the 9th of November, paid on November 20th. They've been announced early to give people visibility towards the end of the year, the following dividend for the next half will be paid- Yeah. ...normally in May. If I had a choice, you'd always become dividend. You tend to find, what we found years ago is, because our dividend's fully franked and you're getting a reasonable yield, and a lot of brokers, once a dividend's announced, everyone's confident that it's going to get paid. A lot of brokers used to, and I don't know if they still do, get clients say, "Hey, look, let's buy it, just come dividend," so you get three dividends in 13 months. Yep. There's that old play. You tend to find, once the dividend's announced, and it's come dividend, it tends to outperform. I know we found that with WAM Capital years ago when we did some analysis. That's why there tends to be announcement, like the banks go the other way. They announce, and then they pay really quickly, and the logic is it's your money, so we'll give it to you quickly. Now, what we're balancing here is we would like Future Gen to reflect its assets. For those that have been shareholders for a while, go back a couple of years when we're trading 20% below the value of the assets, and now we're trading around a little bit of a premium to the value of the assets. In theory, you want that equilibrium, so you want to potentially drive buy into it. To me, it's a nice position. Could I put my hand on my heart and try to convince the Board to go to monthly dividends, which would actually probably be, from an income perspective, it would get another group of investors. Then we go to a 10% premium or a 15% premium. I don't necessarily think that's in investors' interests. Yeah. Also, the headache of it in its own right, isn't it? When people buy it at, like we've had it with WAM Capital, when they bought at a 30% premium, it comes back to NTA and they say, "What's happened?" They say, "Well, nothing's happened. Yeah. They say, "Well, I've lost so much of my money." I say, "Well, I didn't make you buy at a premium. Yeah. Sorry. There's actually a few of these questions around, sorry for all these boring legal questions. No. It's good to talk. It's good. There's a few- It's good. ...talking about NTA. Well- Yeah. ...in summary- Yes. ...from Ian and others. Yes. If you do the calculation that Geoff just mentioned, and you take our last NTA, you gross it up for the performance of the index that- Yes. ...those over the last little while, we are currently at about 2% or 2.5% premium to NTA. Yes. A lot of the TSR, the total shareholder return, over the last year has been from narrowing that discount. In terms of philosophically, I actually believe both Future Generation Australia and Future Generation Global should have an implied premium to NTA. You think about it, and you mentioned it before, so Tom and all the other fund managers, they are not charging the fees that they normally charge. If you'd been an investor since FGX started, the fees that Tom and the other managers haven't taken, and everyone else, is valued at AUD 93 million. Yes. In terms of the money that's gone to the charities, it's AUD 49 million. Shareholders have actually pocketed, what's that? AUD 44 million. Yeah. Effectively, they're getting their money managed for half price. Yeah. In theory, you could do a net present value of that, and that probably means that we probably should be at a 6%-8% implied premium, because you're getting access to the best managers at half price. Yeah. Anyway, that's another. Yeah, we don't like to flag that too much in front of Tom in case- Well, no, we don't. ...he gets upset. We do. We just pretend that doesn't- No, we don't. ...exist. He said earlier he's grateful for being a benefactor. It's great. You've got to look at it also from the manager's perspective. That's what a lot of people don't realize. In the finance industry, people are very generous, and I know Tom, talking to Tom and his colleagues, Dave Paradice, to me. They were in from the very start. They were just, "Yeah, we're in." This is an opportunity for me to give back. That AUD 100 million that's gone to charity, while the managers have given, is it AUD 190 million or AUD 165 million, is it, in total? In terms of the savings that we've made- Yeah. ...it's AUD 175 and AUD 100. Yeah. AUD 175 million. The managers haven't taken fees of AUD 175 million, so between the two vehicles, AUD 75 million has gone to shareholders. That's the generosity of the managers. It's an opportunity for them to give back, and it's an efficient way of doing it. Thanks for all the cash. Yeah. Thanks, Tom. There's a few more. I know we've spoken a bit about AI. There's a question from Jill and others talking about how AI kind of influences the two sort of themes. One is how you're using AI in your process, if at all, and then secondly, how you really invest in that in Australia. You talked about some of the software companies, but are there other derivatives of AI that power data centers? Whatever that you sort of see. Well, from a process perspective, we are using it, similarly to everyone. We've actually internally built a Research Hub, which is AI driven. Oh, what's it called? Has it got a trendy name? Well, we actually don't have as big a marketing department as you, Geoff. No. I thought you'd call it Paradice or something like that. No, it's called Research Hub. I said the same. I said, "We've got to come up with a better name for this. Yeah. We're a workshop. Currently, it's called Research Hub. Yeah. Ultimately, what we're simply doing here, and you'd be the same, Geoff, you take so many meeting notes. We talk to so many companies and different consultants and the like, and we used to put it into OneNote, and it's very hard to get that information back out. It's in your head, you know you had the meeting. What this tool does is all our meeting notes go in, and so when we type a stock or a company comes out with a release, it feeds all of our meeting notes, our proprietary meeting notes, and come out and we can read an assessment of the result, but littered with our own- Meeting notes. ...meeting notes. Yeah- This didn't align with this. Yeah, he told you this six months ago. Exactly. The CEO told you this six months ago. Now he's come out with this. It's a very simple- Yes. ...efficient way of using AI. Nothing's changed from our process perspective. Yes. We're finding it very valuable through reporting season. I was actually joking that. Saves a lot of time, doesn't it? Yeah, very quickly you can go through an annual report. This one, Geoff, is going to be interesting. This is probably the first reporting season where AI is being used by the industry- Yes. ...at length. You'd be more familiar than me, Geoff. Reporting seasons normally have the CEOs come through- Yeah. It's the same 10 questions asked by every investor at every meeting from 8:00- 5:00. Yeah. I think it's going to be a difficult reporting season for management teams because they're going to go, someone's going to come up, say, "On page 153 of the annual report, I noticed the provision increased by AUD 2 million. Yes. This is but an hour after the report's come out. Of course. Normally you get through this stuff like Yeah. These poor management teams are going to have a sweat coming through- Yeah. ...the level of detail that the questions are going to come through. Will they just say, "Hold it. Let me just put it into my AI. Absolutely. That's the answer. I like it. Well, obviously that would be an AI team's job, is to work out the list of questions. Yeah. it might just be AI talking to AI in these meetings, and us and the CEOs just in there taking notes. Do you think it's made you more efficient? That's the intention. Yeah. What have you, to me, do you think you've saved personnel? We have not. We've added personnel. Oh, okay. To get up the. To that's right. Okay. Initially add personnel. Correct Probably save medium long term. Hard to know. Continued, yeah. Okay. It's a very prescient question, Geoff, because everyone's trying to understand the ROI- Yeah. ...of AI, and so that's a very simple tool- Yeah. ...that we're using ourselves, our ROI, I guess, is measured in terms of alpha. If we're having a good day, we go, "This thing's working. Yes. We're having a bad day, we're like, "This thing's terrible. No ROI in AI things. Wasn't my fault. Exactly. That's how we're using it at, I'm sure everyone's got stories about that as well. In terms of the market more broadly, I think, as we touched on, Australian market, it's hard to get exposure, and we're actually sort of taking the other side where we think it's presenting some opportunities. Fantastic. There's a few other questions on ESG, which always divides opinion and, just to be clear, Future Generation Australia's impact is through the donations that we make. We love our investors to think about their social license and environmental impact and all that kind of stuff. Does it form part of your process and the way you think? Absolutely. Paradice has been around for 25 years, and it's largely an institutional business. We've been growing our retail presence, but largely an institutional business. The benefit of that is that ESG is very important to our institutional investors and has been for a long time. We have two investment professionals who all they do is analyze companies from an ESG perspective and then work with our investment teams in making our decisions. We don't have any exclusions. We are allowed to invest in any stock within the ASX 200 or even ASX 300, but it's a level of diligence and rigor that goes with our ESG tools. We have a lot of companies with management and boards around their process and plans, and make investment decisions accordingly. Fantastic. Got you. You don't necessarily say, "I won't invest in that company," but you'll go and meet management, and you'll say, "Hey, why are you doing that? We don't like what you're doing." Is that all? It's not so much about our view. Yes. It's like, "What's your plan? Okay. If you say emissions is- Yes. ...the easiest one, "What's your plan to reduce emissions? Yes. Ultimately it's a checkpoint in the way it is any other business. Yes. Your rollout strategy for a retailer, what's your plan around emissions? Yes. Within each of those, we understand that, we rate management obviously on that ability- Got you, ...we make investment decisions based off of that as well. Yes, got you. At times obviously means selling a position because you're not happy with the way things are proceeding. Got you. Thanks, Tom. Well, we're sort of through the main parts of the questions. We might draw it to a close. No, keep going. Are there any more questions? There's a few. I'm happy to pass them on. Still got a few. Yeah. Okay. Are there any capital raisings in prospect? Is there an opportunity to increase assets under management to position the company for more volatility? Yeah. Do you want to talk about that? Yeah. Well, obviously they're Board decisions- Yeah. ...we would like to grow both Future Generation entities and grow it in a sort of controlled manner. Yeah, it obviously allows us to have more impact- Yeah. ...elsewhere. More impact. The great thing is, I think when we did FGX, I think we had about AUD 200 million of funds under management. Now between both of them, we are about, what are we, one point- Three. ..AUD 3 billion. All the way along, fund managers have, like Tom, have said, "Hey, look, we have got a little bit more capital. Do you mind managing that for free as well? Yeah. They have. Also just for anyone who is a new shareholder, like the charities, there is an investment committee that holds the fund managers to account. The fund managers, they present to the investment committee, and some fund managers, they are not there forever. How many managers have we- I think it is 20 something, 25 or six- 25 have been removed? Yeah, over the life of- Yeah. .both. Both entities? Yeah. Yeah. To me it's what do we look for? We actually look for performance, variance from what we expect, and that's better performance and worse performance. It's management changes. We know, investing with Tom, what his fund's doing in terms of going long, going short, et cetera. It's changing style because we've invested in Tom's fund because we want that type of exposure. They don't all have to be doing well all at the same time. No. It's building out a complimentary suite of them. Yeah. There has been actually a couple of questions on how we select fund managers, but I think Geoff kind of explained it. We're constantly monitoring the fund managers. We review them all every month from a headline level. We meet the investment committee, who I report to and Geoff is part of, meets every quarter, and we review them in much more detail. Then when there are those outliers- Yes. ...we're quite proactive in- Yeah. ...having a chat with them. We have a- Yep. ...of people that are there that if someone in the team needs to be replaced, then we'll bring them on. Yeah. Yeah- It's- ...yes. No, I think, Geoff, I have exhausted- Most of the questions. ...most of them. Yeah, I think most of them. If you're not replaced by AI and your own bot you've created, would love to have you back, Tom, before too long- We'll see about that. ..genuinely, thank you so much for taking the time, and also for just being such a great supporter and such an important driver of our returns over the last long time. Thanks very much for that. Thank you. Geoff also, thanks for making time to come in to see us. Thank you all for joining us. There'll be a survey, I think, that pops up on your screen after this, but we'd love you to just spend a few minutes filling that out, because we're trying to improve our transparency in the way we communicate with our shareholders. Very grateful if you could spend some time on that. The final thing is, as I said, in September, we'll be hosting, or rather my colleague and Jennifer Westacott, Bonnie Ashton, and Jennifer Westacott, will be hosting some of our not-for-profit social impact partners for a discussion a bit like this one, but with a slightly different bent in that they'll be talking about the great work that they do. Yeah, we'd love to have you online for that as well. Until then, thank you for your time. Thanks for joining us.