Good morning, everybody. Thank you for joining us today for the WAM Leaders full year results webinar. My name is Olivia Harris, and I'm joined today by WAM Leaders Lead Portfolio Manager Matthew Haupt and Portfolio Manager John Ayoub. Before we begin, there is a disclaimer displayed for you on the screen to read. That's just to say that everything we discuss today is general in nature only and is not considered financial advice. Today, to start, I will first give you an update on the WAM Leaders full year results, which were announced to the ASX earlier this month, and then I will pass over to Matt and John to discuss the market. So let's start with the portfolio performance. The WAM Leaders investment portfolio performed strongly during the year to 30 June 2023, increasing 13.5%. Since inception in May 2016, WAM Leaders has achieved 14% investment portfolio performance, outperforming the S&P/ASX 200 Accumulation Index by 5.6%. The WAM Leaders Board of Directors declared a full year, fully franked dividend of AUD 0.09 per share, and this represents a 6% dividend yield on yesterday's share price of AUD 1.50 per share. The profits reserve was AUD 0.361 per share as at 31 July 2023, representing four years of dividend coverage. With that, I will now hand over to Lead Portfolio Manager, Matthew Haupt. Thanks, Olivia, and welcome everyone to the WAM Leaders webinar. I thought I'd start off by talking about the year that was, and then we'll walk through our outlook for the market, and then I'll hand over to John, who'll walk through some of the insights from reporting season. I thought a good place to start was always looking back at the year that was. The financial year 2023 was a very good year for equities, despite significant headwinds. We had really high rising interest rates, we had central banks trying to tackle inflation, and we had banking crisis as well, which was happening in March of 2023. Despite all these risks, equities went up, and I guess the question is: Why did equities go up? And ultimately, it came down to a resilient consumer. What we saw was a lot of participants were talking about recession calls, which, you know, we had sympathy towards. But what we saw was a really resilient consumer, and I guess the key takeout here was around real wages increasing a lot and higher levels of employment. So that created an environment where corporate profitability was high, despite all these concerns. So I guess when you look back at the year, despite all these significant headwinds, the underlying health of the consumer, because they were fully employed and had high levels of real wages, consumption continued at a pretty good pace, and I guess that we saw that across most companies throughout the year. So, I guess the weakness, which was highlighted a lot throughout 2023, was in the manufacturing sector. You could argue we were in a global manufacturing recession, and that was predominantly by a slowdown after the large demand surge we saw coming through the COVID period. And then there was an overstocking because of supply issues. Manufacturers built up huge supplies, and what we saw was a real windback in goods demand. So, manufacturing looked terrible through 2023, but I guess the bright spot was services. So you saw services across the world be hugely resilient, and they were printing at a really high level. So that saw some strength across end markets and, again, increased employment, which was great for equity markets. If we look at market outlook now, so markets, when we look at markets, we're always trying to work out if they're fairly valued, what are the drivers going forward, and at the moment, we find it hard to come up with a clear catalyst which will drive the market higher. But on the flip side, we can't identify a catalyst to drive it lower at this point in time. The soft landing camp is very much the consensus at the moment. So what that means is, everyone thinks the economy will hold in there, and we tend to agree with that in the short term. So what will happen is, equity markets are likely to trade sideways for a period. And what we will see in 2024 is we think it will be the year of interest rate cuts. So in Australia, you can have a look at the forward interest rate curve, and it says there's gonna be one interest rate cut in Australia. In the U.S., there is over 1% of interest rate cuts. So 2024 will mark the year of interest rate cuts, and what we think this will mean is it'll be supportive of valuations, but again, I think activity levels will decline. We're seeing a slowdown across the world, so it's gonna be a slowing environment, a slower earnings growth, higher costs. So the environment, despite those headwinds, our investment process allows us to you know, trade through cycles. So we actually don't really care what part of the cycle we are in. Our investment process is nimble enough where we can identify opportunities in all markets. So I can envisage us positioning in a slightly more defensive way, more conservative way, over the next period. But saying that, there was a few remarkable opportunities coming out of reporting season. So I think overall, the backdrop is quite supportive in the short term. We think medium term, it's gonna get a little bit tougher, especially on the growth front, earnings growth. But ultimately, we're gonna go into interest rate cutting cycle, which again, is traditionally pretty good for equities, once you commence that and, are partway through that. So overall, I, I think the environment short-term is, is pretty benign. Mm. But ultimately, it's gonna get tougher. But we can, we can invest through this cycle, and then, 2024 will be the year of interest rate cuts, so that will be the start of a new cycle. So I'll probably leave that there, and I'll hand over to John now, who will run through some of the insights- Mm-hmm. We saw from reporting season. Thank you, Matt, and welcome everyone, and appreciate your time this morning. We would characterize the last reporting season, the last little period, as probably one of the trickier periods that we've faced in some time. Why we would say that is the volatility and the composition of earnings and reporting was vastly different from what we've seen over the last decade, where it was a lot easier to quantify revenue and costs and the trends that certain companies and sectors were directionally moving in. Where we are today, I'll call out a few things that we've identified that we'll be conscious of going forward, and I think the market, again, will be focusing on. Firstly, revenue trends have slowed down. To Matt's point around being cautious, we were probably a little bit cautious too soon, and what we saw was towards the latter half of last financial year, those revenue trends hold up a bit longer than we thought, but they have actually slowed down, you know, into post-reporting periods. And as we get into August and September, we continue to see a more rapid slowdown for the top line for most companies globally. So from that standpoint, we have become more and more cautious around the outlook, for companies broadly, around that revenue. The second factor that we became more and more aware of, and you saw in reporting season, was the ability for analysts and market participants to forecast the cost of debt. The cost of debt within balance sheets. So companies like Ramsay and the like, where there was material spirals on their balance sheet and the amount of money they have to pay to facilitate their balance sheets, that was something that the market probably was focused on, but not enough. And what we've seen is the cost of debt, the inflationary pressures on companies more broadly around CapEx in the mining space, where blowouts from mining companies when it comes to doing projects, just doing day-to-day operations, they have actually heavily weighed on the carrying value of assets, also on the profitability of those assets as they start to produce. And the other area in the retail space and other spaces, wage inflation. We're still yet to see the full impacts of wage inflation to carry through, the P&Ls of companies. You, when you start talking to Wesfarmers and Woolworths and Coles, and they're talking, you know, 4, 5, 6% wage inflation that commences this year, in slowing revenue trend environments, for us, that's a very difficult recipe to combat, and we really need to isolate and focus on companies that have the ability to manage the cost basis going through these parts of the cycle. And those that don't, we need to be really cautious of, ensure that we find those companies with the self-help, and the ability to navigate these tough waters that we're heading into. As Matt said also, what we did find was a lot of opportunities come out in reporting season, and I'll identify a couple of those, and we've already started to see a few of the questions come through, so we wanna make sure that we leave enough time to answer everyone's questions today. But, you know, names that we really, really liked, and one which actually is very topical at the moment, is Orora, which announced a material acquisition this morning. We think today's acquisition is a game changer for that company. It moves away from what they've a more CPI plus growth business to a more cyclical exposure to luxury brands, and we think it's a step change, and we really like the opportunity that it presents, so we will be participating your money in that capital raising today. Other names like QBE, Treasury Wine, Challenger, Brambles, and we've actually now put WiseTech in a meaningful way into the portfolio. We think these are companies that should carry the portfolio for the next 12-18 months, and we really like what they provided us. And things that we would add to the watchlist, where we're not ready to pull the trigger quite yet, but things that we've identified as potential opportunities. These names are Domino's, A2, Ramsay, which we have known for some time, Stockland and Iress. Now, these are, these are companies that all have some warts on them, we'll say, but, we will identify the, the value opportunity and ensure that if we, do decide to pull the trigger one way or another, they'll be in the, in favor of this for shareholders. So, that's probably the wrap-up of reporting season. Other themes that emerged was the reach of government. We're starting to see increased amount of government policy, that's going to impact, the earnings of companies and Qantas. Now, we know there's a question on Qantas later, so we'll save that for later. But Qantas is one that's being impacted by government reach, the oil and gas space, coal, the gaming sector. We're starting to see the prevalence of, of, government reach impact the earnings of these companies. Unfortunately, theft and what they call shrinkage in pockets of retail has started to emerge as a material headwind as well. So we're gonna see CapEx, so we'll spend from the likes of Coles and Woolworths and Wesfarmers to police, and I think they generate a lot of headlines in the press around that, but it's actually having a material impact on margins of companies, which are part of cyclical downturns, and the way that we manage cyclical downturns. So it's clear that we are gonna go through a tough period going forward, and how we navigate that, it's gonna be challenging, but we should be there. Yeah, and I'll, I was just gonna add there, the, the thing that we're really watching is the labor market. So the labor market, um, has been remarkably resilient, and we touched on that, but there is signs of, sort of, um, some early signs, I guess. So for us, the labor market is crucial this year. That's the one thing we'll be watching, um, every bit of data we can get our hands on around, uh, employment and wage growth. So, I mean, that'll be the key, key drivers we're watching this year. Um, but I think that's, that's about it from us. Olivia, if you, if you want to open up to questions now, we can, um, go through those. T hanks, Matt and John. Yes, we'll get right into questions. Lots coming through, so everybody, please keep sending your questions, 'cause we'll try to get to them all. If we don't get to your question during the webinar, we will contact you afterwards. The first one is from George: "Could you please comment on the Dexus result and your outlook for the company? And maybe you can touch on your comments on the property sector as well. Yeah, so Dexus, we caught up with Dexus recently on the result. I guess the key takeaway from us is the company is doing extremely well in an incredibly tough environment. Probably the difference when we saw them last, I think there was a little bit more hope around a quick turnaround in the cycle. What was evident this meeting was, it's gonna be a little bit more drawn out. So, you know, for us, we were investing in the company because it was a heavily discounted asset to its NTA, and we thought maybe interest rates would get cut more aggressively. What we're seeing is a higher for longer environment, which is not ideal for Dexus, because it becomes a more of a grind cycle rather than a quick turnaround. The investment horizon has had increased a lot from where we thought we'd get rewarded quite quickly. So for us, great result, great company, great management. The cycle is, t hey're fighting the cycle, and the cycle, in the absence of a big interest rate cutting cycle, is gonna be a bit of a grind there. So we've reduced that holding materially, but still like the fundamentals, but we were running at around 5% of the portfolio. Now it's way down, like 1.5%, 1.25% of the portfolio. So the conviction around the thesis Mm-hmm H asn't decreased, it's really the timing. So we just don't want to tie capital up for that longer period of time. Thanks, Matt. The next company that we are getting some questions on, we've gotten quite a few questions on, Star Entertainment. So can you just provide some comment on Star? And if you think all of the negativity has already been factored into the share price, or do you think there's potential for another unknown unknown to spring up? Thanks, Olivia. I guess we've been hit with the two most controversial positions in our portfolio straight away. I did notice there was a question from Jeffrey around Star and Dexus; are they mistakes? I would say Star is definitely a mistake. We do make mistakes from time to time, but it's how we manage that risk in the portfolio, which is important. And with Dexus, where we went too early, our average entry price in Dexus was in the AUD 7s, and we got a couple of dividends on the way through, and our average exit of those positions, on reducing our position, was above AUD 8. We managed to reduce the impact on shareholders there, and we actually made a profit on the vast majority of it. Where the mistake was, was opportunity costs, where we didn't actually deploy that, that capital to things that should have outperformed. So, but with Star, it's very different. Star, we, you know, if we take a step back, we, the big mistake we made was, we didn't appreciate the impact that the reach of government would have on earnings. And the one thing I'll call out was, there was AUD 595 million worth of legal costs, associated with the last result of Star. You know, I'll go off on a slight tangent here, and, forgive me for this, but when we invest as shareholders, and one of the things that we've recently noticed is that the sins of the board and management have been suffered on the shareholders. We weren't the ones that made the mistakes. We made the mistakes in the investment, but we didn't make the mistakes from the earnings standpoint. The shareholders in Star are the ones that borne all the responsibility and all the pain when it came to the mistakes that regulators, management, and government had made in regulating this industry. Going forward, what we can say is that the lessons of the last 10 years have been learned. What we can say is that Star's management have taken large steps in actually turning around this organization and ensuring that those mistakes and those unknown unknowns don't happen again. So from that standpoint, we are very pleased with what Robbie and the team have done. They're not out of the woods in any regard. This is a long battle, and we are with them for the long haul now. We did participate in the capital raising, and our biggest weight in the name is more recent than it was in the past. So we've been able to manage our size okay, but it has had an impact on shareholders and our performance over the last 12 months, in particular. Where we stand today, I think a lot of the reform has taken place, a lot of the change has been done. What's outstanding is the refinancing of the existing debt facilities. We have as much visibility as everyone else does, what's publicly available there. We're confident they'll get through that. I think the last few fines are the last two outstanding things. Again, in proportion to the size of the company, to its peers, we think they'll be able to manage that. And what we do know is in 2024 and 2025, when Queens Wharf is open and a lot of the reforms taking place, these are still critical infrastructure assets for the Australian tourism industry. They still provide numerous jobs for Australians and provide a fundamental purpose for that. So we are encouraged by the New South Wales government and the way that they handled the current. I'll be clear, the current New South Wales government and the way they handled the reform of the tax. We think the Treasurer Mookhey was outstanding in the way that he pivoted from some of the mistakes of the previous government. With that, we're excited about the next 24-36 months that Star has ahead of it. It's not out of the woods. They need to regain their social license, and they're doing everything they possibly can. You know, we're there for the long haul. Thanks. Thanks very much, John. The next question is from David. It's about growing the size of WAM Leaders. So do you have a preference on a way to raise capital, either through a share purchase plan or a rights issue? And are there any plans in the pipeline for further issuance of shares? Yeah, I mean, thanks for the question. Obviously, we're the managers of the money. We don't get to decide on the capital raisings or the how it's done. I guess I'll answer the first one. Do we have a plan on raising capital? No, not at this point. Do we have a preference between a rights and a share purchase plan? I guess it gets down to your idea of what's fair. Traditionally, rights issues are fairer, I guess. You know, if you hold a certain amount of stock, you get allocated a certain amount, where a share purchase plan really doesn't matter how much existing stock you own, you can obviously take up more. So I guess it's what idea you have is fair. I mean, theoretically, a rights issue is fairer, but then it also forces you to take those up as well. So both have got their pros and cons, but for us, we don't really have a huge preference on how it's done, but it's obviously up to the board about what structure and when it's done. But I can say, there's no real discussions around raising capital within Leaders at the moment. Thanks very much, Matt. John, you had mentioned briefly that we've got some questions on Qantas, so I'll turn to that one next. Can you just provide a comment on the company at the moment? Anders has asked: Has it reached its high watermark? Yeah, you know, it's one of the things that you. When you go through a news cycle or a period of volatility like Qantas is going through, you always turn to: How far can this go, and what's next? And we've started to see on Twitter from members of Parliament suggesting a Royal Commission and more reform into their profitability and fines from ACCC, pockets of the market. So do we think this is the end of the news flow for Qantas? Definitely not. Just to be clear, we're not invested in Qantas at the moment. What we do know is that the business itself has a structural advantage in Australia, in the domestic market, and that domestic advantage will remain through time. Where a lot of the focus is on today is in the profitability and the pricing of international flights. What stirred up the hornet's nest has been the application of Qatar and other airlines for more international slots. We're starting to see governments, state and federal split, and normally that's not a good sign, and, Albo defending, Qantas is a bit like, a coach defending- or a board defending a coach for a sporting team. You know that there's gonna be a pivot pretty much, pretty, a pivot soon. We would expect that there will be a review into international, capacity. I think industry players, so tourism providers, air, airport owners, I think they would all like to see more airlines flying to Australia. How that happens and those international agreements that need to be reached, that's a different level above us, and we'll see, we'll see how governments negotiate those tactics. But what we do think is that there will be more flights internationally, and the profitability of Qantas' international business will change. But it is worth remembering in the past that international was never really the, i t was never the driver of profitability for this group. It's always been the domestic businesses driving profitability. So as when the banks went through the Royal Commission, and the like, those probably the darkest before the dawn. That's at the darkest before the dawn. So it's something that's definitely on our watch list. Our valuation assessment now, I think, kind of. Our valuation assessment today, we effectively get the international business for free. So if the share price were to go to the low fives, which it may potentially do on negative news flow, it'd certainly be something that we'd be considering as an investment going forward. But we think news flow will continue to be hard and negative on the company for the foreseeable future. Thanks, John. The next question is from a shareholder named Matt. He has asked: Where do you see inflation going? Oil prices have gone up over 20% in the last three months. Do you see inflation re-accelerating, and if so, how are you positioning the portfolio? Yeah, that's a great question, and very observant as well. It's something we've been discussing over the past week, actually, the impact of oil, because oil has a better track record of predicting inflation than economists, and very direct. So it's really when I looked at it, like, earlier in the week, it's really March of last year was the peak, and then it's fallen down. But then it's gonna start cycling through, you know, OpEx, operational expenses, you know, really now. So you're seeing a deceleration. I mean, the thing we look at is the break-even rates, which are, you know, market-based rates. That's the market's interpretation of inflation. And, you know, the five-year rates are 2.3%, and the five-year rate in five years' time is 2.4%. So inflation expectations are actually grounded in the range. The trajectories are lower at the moment. You're seeing it roll over, but you're 100% right. Oil will be actually picking up inflation in in the operating expenses. So we expect inflation to re-accelerate probably in the first quarter of next year, of the calendar year. That's when we think it will start to pick up, and you will start to get moderation through other names, too. But when you break down inflation at the moment, it's really a lot of components are becoming quite sticky. So yeah, this oil, we think, is really something actually could upset the market that higher for longer, stickier inflation. So it's something we're watching, but it's really, again, dependent upon OPEC. What do OPEC do? So far, they've held together. That's the group that controls basically, I think it's like 40% of all supply, or 35%. They've been cutting dramatically into this market. So you've got a real physical tightness in the market, floating storage is at low levels. So all the ingredients are there for a tighter oil market. So yeah, it's a great point, Matt, and we think, yeah, first quarter next year will start to pick up, and then that will change the rate dynamics as well. You know, those forward interest rates might come out of the market as well. So a really key thing to watch, and yeah, something we've been discussing quite quite a lot over the last week or so. Thanks, Matt. The next question is from Lee. Let's see, Lee's asked: How does WAM Leaders see the reported slowdown in the Chinese economy, and how will this affect the companies that you hold in the portfolio? Yeah, so another great question, really topical as well, is around China. I read a stat the other day, China's been responsible for 40% of the global growth over the last 10 years. It's such an important part of the global economic picture now. What we saw out of China was post-COVID, they came out of COVID very late. They hoped that reopening the economy would see, you know, consumption really pick up. But unfortunately for them, consumption didn't pick up, because in the background, the asset prices, which are, you know, house prices and the like, are around 60% of everyone's personal balance sheet. So they were watching their biggest asset fall in value, and that wasn't translating into consumption. So the government finally, you know, as of probably the last month or so, really stepped up support, 'cause they've realized they've got to stabilize asset prices, even get asset price growth to unlock consumption. And we're seeing a huge change in rhetoric out of the Chinese government. So, you know, China's probably everyone's called the death of China for, you know, you know, 15 times in the last 10 years. It's, it's never eventuated because a lot of people put a look through the lens of an open economy. They're a closed economy, so they can actually change things quite dramatically. So we are actually positioned the portfolio to take advantage of, you know, some of the turnaround in the property sector and infrastructure, because global growth is pretty slow, so they have to turn internally, and the lever they know how to pull internally to get growth is through spending, through infrastructure. So we think fixed asset investment will actually be quite a tailwind for the iron ore sector. So the names we're playing in a meaningful manner are Rio as our number one preference, and then BHP. And then if you go down the chain a little bit, a little less exposure, but companies like Iluka, which have been really hit after reporting season, and South32 as well, to a lesser extent, that it's not as direct as Rio and BHP, but they're the ones we're really putting a lot of shareholders' money into, 'cause we think there will be a clear trade here. And we're starting to see some of the sentiment turn, because I think the sentiment in China on China at the moment is at all-time lows. Everyone thinks it's almost uninvestable, and global money is not going there, and we think that will change over the next few weeks. And outside of resources, Leaders' primary exposure to China is Treasury Wine Estates, where we think China reopening and relations between Australia and China continue to improve. And following the barley decision between the governments, we think the opening up of the Chinese market will add another lever of growth for TWE, following their improved distribution model throughout broader Asia and the strong acquisitions that they've made in the U.S. So we think TWE will benefit as relations continue to improve and what they've been able to derive over the last two years and with addition to the Chinese reopening should put into good stead. And the other name that we're looking at, it's a smaller position, and it's something that we're looking at from a brand perspective, and we're attracted to good businesses with great brands that are going through cyclical or tough periods, and that's A2 Milk. And what we're trying to get our heads around there is around the birth rate in China, how that affects earnings going forward and what the trajectory of that birth rate. These are really one of the mega themes that we've got to try to get our heads around. But the brand is incredibly strong, the product is incredibly good, and the valuation is incredibly attractive. So, it's one that's definitely on our watch list and potentially could, if things stack up, could be a bigger position in the portfolio. Thanks, Matt and John. We're getting a couple questions on Endeavour Group, one from Peter and one from Richard. So can you provide some comment on Endeavour Group, and if you see the potential for a likely shift in sentiment? Yeah. So again, we caught up with Endeavour, and it's a decent position in the portfolio. So we caught up with them in August. I guess the key thing for Endeavour, so Endeavour owns Dan Murphy's and, you know, pubs and clubs in its most simplest form. So we caught up with them, and what happened, again, similar to Star, the Victorian government came out. I mean, this really sent the share price lower, talking about some of the restrictions around gaming and potential tax changes. And the share price, I think on the day, was down 15, it sounds like? It was marked down quite aggressively. So the business is performing really well. So we caught up with the company. Their result was great. You know, the high interest costs are coming through like most companies, but again, their clients or customers are actually quite resilient. So, they haven't seen any slowdown at the moment, and their business is tracking quite well. They've had positive sales growth across, you know, most of their businesses, you know, in a decent manner. So we think the company looks incredibly cheap at this point in time. We're a little bit scarred post-Star with gaming regulation, but again, we think Endeavour is in a much better position, and we really like their business. I mean, Dan Murphy's is a fantastic business, very resilient. It's worth remembering that Dan Murphy's is the vast majority of the business. Yeah. When you talk about products and brands and stores, Dan Murphy's is right up there with the Bunnings. Mm. These are assets which are undervalued, and I think in the fullness of time, Dan Murphy's will be realized as, you know, one of the best businesses in the country, and the valuation will reflect that in time. Yeah, yeah. So we like Endeavour, despite some potential regulation headwinds, and I guess maybe the other thing people are worried about is the consumer slowdown there, which, you know, ultimately they will get hit, but we think the valuation more than takes into account, and it's reflected in that already, so we're happy to be invested in Endeavour. Thanks, guys. We've also got a couple questions coming through on Ramsay, which, John, I think you touched on earlier. From Peter and from Craig, can you just comment on your take on Ramsay, and if there's a catalyst that would stop the decline? Yeah, thanks for that question on Ramsay. I did mention that we, following the results day, we bought some stock around that AUD 47-AUD 48 dollar level. And that's the first time since, I think, AUD 69 dollars that we'd owned it. And what happened at the results, and I think what was our biggest concern, was the amount of debt. Firstly, the amount of debt that the business was carrying, and secondly, the cost base and the wage inflation that they would have suffered from EBAs and the like from nurses and other staff. So that came through in the results, leading to 20%-30% downgrades in the August results. Why are we attracted to it today, and why do we put a position back in the portfolio, and what are the catalysts? Well, firstly, there's asset sales. Sime Darby, which is their Malaysian asset, they could realize circa AUD 700 million-AUD 800 million worth of cash there, which can bring down the total quantum of debt. Secondly, what we do know, these assets and the infrastructure-like assets that hospitals do provide, have a place and have a purpose in society. So we don't think the government's gonna come in and erode their earnings any day soon. So we think that as relations with Medibank and other private health insurance providers worsens, and it will worsen, I think the outcomes for shareholders will get better because the current agreements and the current escalation of costs that they currently have with those medi Those health insurance providers, they'll be ripped up and start again to cover a lot of the extra costs that have been borne by hospital providers. And as people start to return to hospital and surgeries and the like take place, the earnings in Europe and Australia stabilize. This is a good business, and it's a high-quality business that we wanna own. Potentially some short-term headwinds around the debt structure and, you know, we would welcome a capital raising. We'd happily participate in a capital raising, but the board won't want to do that. So I think that we just need to ride out again 12 months of increased debt costs, and as earnings return, it's something that could potentially be much higher in the portfolio. But as we often do, we'll put an incubation position in there, we'll watch it closely, and if the opportunities arise or if our fundamental analysis says to have a crack, we will. Thanks, guys. The next question is on Woolworths. The August results showed Woolworths maintaining its superiority to Coles in terms of business performance. Do you believe the current management is capable of turning performance around so it can catch up to Woolworths and thereby making it a potential addition to the portfolio? Or commenting on Coles. Sorry. Yeah, it's a really interesting question and one we always think about. But what we've learned over time is the turnaround within supermarkets takes a very, very long time. I remember when we were first invested in Woolworths, you know, pre the turnaround, I mean, it was at AUD 18, I think it was, and, you know, they had all these great plans, but it was really about three or four years into that journey before it really took traction. The problem we have with Coles at the moment is they're starting way behind, and then they've got, you know, really big issues with their supply chain. The new systems they're putting in place are over budget, over time, delayed. So we just struggle to see over the next few years how they're gonna make inroads when they're actually fighting their own internal battles. So for us, Woolworths is a clear leader. Management are fantastic. We don't own Coles at this point in time. Would we look at Coles? Yes, if it got cheap enough, but again, we think they're fighting internal battles, let alone fighting the market battles. So for us, it's a very clear case of being overweight Woolworths and not owning Coles at this point in time. Thanks, Matt. The next question is from Nick: What is the current cash holding of the portfolio, and do you expect to increase that over the next couple of months? I mean, cash is really a function of opportunities and, you know, at the moment, we're finding quite a lot of opportunities, and John mentioned it this morning, you know, we've got Orora, which hopefully will be a significant addition to the portfolio, so we're gonna need a bit of cash there, but at the moment, running about 4% cash. I mean, it, I can't really see it moving too far unless there's a clear inflection point. But it generally runs between 2%-5% through most of the year, unless there's a clear inflection point either way, where we're, like, equities are gonna rally, then we actually, you know, dial up some of the exposure, or if we obviously think equities will fall, we'll pull back exposure. But generally, we do all our work within the holdings within the portfolio. Cash lever is very rarely used. It's really a high conviction call when we pull the cash lever. It's more portfolio construction, which is real, how we manage risk through the cycle. Thanks, Matt. The next question is from Sally: Does the WAM Leaders investment portfolio have any exposure to lithium? Yeah, we do have some lithium. Significantly less than what it was probably three months ago. The names that we own today are Pilbara, following that pullback at the last result, and Mineral Resources. The others in the space that we have an eye on is Allkem, but we think that's probably more fully valued relative to the other two. So if I focus on Mineral Resources and Pilbara, Pilbara, the last update provided a lot of concern for the market in the increased amount of capital they'd need to spend on their existing projects. I think for us, what we'd like to see from Pilbara is a bit like Fortescue, and what Fortescue did for years in its early days, just reinvest in its single asset, develop that asset over and over and over, and keep expanding the footprint and the capacity that you can derive from that. So I think if, with some reflection, some focus, Pilbara has, is the top-tier asset that we can see today, has the most leverage if they get things right. We're not quite there to make it a really big weight in the portfolio, given some of the industry headwinds and some of the concerns around its capital profile. So we'll watch that one again. And Mineral Resources, you know, similar high quality, high quality lithium provider, producer. Balance sheet is somewhat of a concern for us and for the market. We would need to see some of their cash flow and some of their CapEx budgets maintained, so cash flow generation to come through and their CapEx budgets to remain, maintained again for us to increase the weighting in those ones, in totality. But as Matt said, our focus and our resource positioning has very much been tilted towards BHP and Rio, and we have some of these positions like Mineral Resources and Pilbara, towards the lower end of the portfolio. Thanks, John. The next question, we've got a couple coming through on Fortescue. Doug and Nava have asked: "Do you have a view on Fortescue? And has the recent turmoil with executive departures provided a buying opportunity, or do you think Fortescue's focus on hydrogen is perhaps dragging its performance? The biggest challenge with Fortescue is not so much what we think, it's what the market's gonna think. We always like to support strong management, but what we've seen is that with 11 or 12 senior management leave the organization, there is a clearly a misalignment of what the chairman would like and other people in the organization want. If it was a pure iron ore player, which is what it's been for since day one, it would be a lot more compelling for us today. But the difficulty in assessing Fortescue today is trying to work out what the hydrogen projects are worth. As it stands, and from the publicly available information, we don't know the capital structure, we don't know how much money Fortescue's gonna deploy, how much capital partners are gonna deploy, what the return on that capital is gonna be, where that hydrogen's gonna go. So as you go down that rabbit hole, more and more questions arise. We're not gonna question that hydrogen's gonna work, 'cause it will. But at what return is what our focus is. The more it pulls back, the more attractive it becomes. Like all things, if you can get something for free. So if we're gonna get the hydrogen part of the business for free, and Fortescue and the chairman say that only X% of the free cash flow is gonna be geared towards FFO, again, it'll be something to, for us to consider. But as we stand today, it's a lot easier to buy Rio and BHP, given the vast majority of other shareholders or investors out there will play it the same way. Yeah, I was just gonna say, you can't make an investment if you can't model it, and unfortunately, Fortescue's in a position where we can't model it. You know, we'll never tell management what they need to do, we'll just do it by our investments, and we don't own Fortescue. So, you know, we were saying we're not in the business of telling billionaires what they can do, what they can and not do. But yeah, we can vote by our where we deploy capital, and it's just too hard to deploy capital into Fortescue at this point in time. And good luck if they can do it and succeed. All the best, but for us and protecting shareholder money, we unfortunately can't get comfort. Thanks, guys. We've got a few questions from Kim on interest rates. So what's your outlook for interest rates in the US? And will the rate differential between the US and Australia cause the RBA to eventually raise rates higher in line with the Western world? And do you plan to rotate to more defensive sectors? I mean, that's, that's one of the hardest questions out there at the moment, is, and it, and it's changed a lot. I guess I'll walk through what's changed. A lot of the interest rate cuts have come out of the market in 2024 already, as the economy has been a lot more resilient than people thought. Will the RBA follow the Fed up? Highly unlikely. We think the Fed will be hiking, cutting, not aggressively, but they will start their cutting cycle next year. So the RBA have been quite slow on their hiking cycle, but we think the transmission mechanism is so much different in Australia than the U.S., obviously, with the way mortgages work, with the variable rate mortgages, so the transmission mechanism is quite direct in Australia. But you're, you're fundamentally right. Australia used to trade at a premium on rates to the U.S., you know, through all periods, and, for some reason we're trading below at the moment. So, it is quite bizarre, but the U.S. have been very, very aggressive versus the rest of the world, except for, you know, Canada and New Zealand have also been aggressive as well. But we think the RBA, you know, they meet today, unlikely to change. The market's got zero chance of a hiking today. And there's basically no more interest rate in the Australian future curve, where you can sort of see market expectations, and we've got one cut in December 2024, being the start of the cutting cycle. So we think the U.S., I think I touched on it earlier, has got a 1% of interest rate cuts in 2024. By the time we are hitting December 2024, they'll be better aligned. So, we think the U.S. will come back to this Australian level of interest rates. Obviously, the RBA do look at foreign exchange, the Australian dollar, so, you know, they, they could respond to the Australian dollar moving, you know, that, that could sway them either way. But, I think that first scenario of the U.S. meeting Australia is the most likely one at this point in time. Yeah. Also, if you look at oil, we touched on it earlier, oil prices, that could be the spanner in the works for everything. If oil price does go over $100, $120, those interest rate cuts are coming out of the market. Mm. Or it could fast-forward a potential, you know, crash scenario, where interest rates would be cut in response to an emergency. So, very dynamic, and, I mean, that's, that's the advantage of our processes. We're looking daily at these things to change the portfolio. Will we go more defensive? I think the underlying tone, we always invest in Mm Q uality businesses, so we never go up the risk spectrum by investing in low-quality business. So the way we would do it, we would go more defensive if you saw, you know, the labor market falling. So if unemployment increased, we'd, we'd certainly go more defensive. You know, we are tilting the portfolio a little bit more defensive at the moment, so we've added, you know, some gold exposure and some Transurban, just initial positions to try and add a little bit of defense. Mm. You know, Telstra as well, Woolworths, so we are sort of moving in that direction, but we don't have enough of a catalyst- Mm T o really deploy into a defensive position at the moment, because the market is in soft landing mode at the moment. Everyone, e quities are expensive, but everyone still wants to own equities, I mean, there's no short-term catalyst to change that at the moment. The other thing about our portfolio, it probably lacks a lot of the momentum stocks that are outperforming in the market at the moment for the short term. We've decided to have a few more battleground stocks, as we prefer to call it, stocks that have more short or medium-term headwinds that we think have longer-term valuation support, and we prefer to own those through these cycles where the upside is far more vast than the stocks that have been bid up on short-term, you know, earnings results. Thanks, guys. The next question is from Simon. He's asked: What Australian economic data are you most concerned about that might cause you to turn more negative on the market? Employment is probably where we'd be focused, primarily. Yeah, a lot of things like retail sales have turned negative, now, but if you look at the main driver, what of what the outlook's gonna be, it's unemployment and what happens there. If you, if you look at the most recent results period, a lot of companies are starting to focus on that part of their businesses again, as wage pressures start to come through, as those revenue trends start to slow down. The management are always focused on driving bottom line, and the most efficient way to drive the bottom line in the short term is headcount removal. We think towards the back half of this year and early next year, we could see significant headcount removal in a lot of the large Australian-listed companies, and if that does eventuate, that just, that changes the focus from a soft landing to a hard landing. I think that's where a lot of our focus would be on right now. Yeah, in the very short term, it's really around, you know, credit card data, arrears, the 30-day, 60-day, 90-day arrears through the banks and credit growth. So that's sort of the short term. Mm. Retail sales is another one. It's, it's a fairly good leading indicator. So, I mean, we, we watch everything, but yeah, ultimately, the thing holding everything together is the employment rate and real wage growth at the moment, and if they break, then, yeah, things will change quite dramatically. Thanks, guys. The next question is from Elizabeth: Does WAM Leaders invest in APA? And if so, will you be taking up the current share offer? Yep, we certainly do invest in APA. Do you wanna give it your favorite quote on the company? Yeah. I call APA the mini Macquarie. It's got all the hallmarks of turning into like a, you know, the infrastructure business of Macquarie. You know, very early days, but it certainly does. I mean, for us, yeah, we did take up the in the placement with the APA, when they- We, yeah, we talk about rights issue. Yeah, the rights. You know, when they took over Alinta, the energy business. So for us, yeah, it's a great business. It's very defensive. It's not very exciting. It's not a business you'd go, "Wow, this is incredibly exciting!" But we, we don't mind boring businesses, and this one generates a lot of cash, and, you know, it does actually have some upside to new energy as well, as they pivot the company away from the traditional Mm Y ou know, gas pipelines. They have. They generate, you know, high levels, over AUD 1 billion of free cash. There is significant opportunity for this company to transform themselves. They'd have to do it very sensibly, and so far, so good. We're quite happy with the way they are progressing, and we think the company, you know, over the next 10 years, could look a lot different, and they have the cash flow to do it. So, when you look at opportunities, if it was just a utility, you know, with a regulated asset, you know, that's not all that exciting, but at the moment, they're branching away from that, and they're developing this business, and it could turn into something quite good and meaningful over the next decade. Thanks, Matt. The next question is from Blair: "Your views on the ResMed share price weakness, please? I gotta say, we're getting hit with all the good questions today. Yeah, I like, I like where this is going. So ResMed was twofold, I think. The impacts on the share price, twofold. Firstly, the earnings result itself was a miss, and if you go back to the previous quarter, management had indicated that there would be margin improvement and on gross margin improvement, and the result had no gross margin improvement. They can say what they want around mix and the like, and what drives the margin, but the fact is that on a stock that was trading on the multiple that it was trading on, it needed to deliver on what it said. Even though revenue trends were being positive and the product and the like were being continually strong, missing the margin when they explicitly told people that there was gonna be margin improvement, was a big no-no. So I think management have taken that lesson, and we would look to, you know. On your question of going forward, what does it look like? I think going, i f they have an ability to demonstrate that that margin starts to track towards historical levels, then absolutely, it would become an attractive investment opportunity. The second part of what's going on with ResMed is the harder one to answer, and that, and I'll be crude here, and there's a new fat drug out there, which basically, people can take a drug which actually, the bare argument on ResMed is, you can take the drug or the injection, and the need for ResMed masks and the like will dissipate, and the addressable market going forward for ResMed will shrink. That view is very strong in the U.S., as a lot of the drug companies are heavily promoting the new drug as a wonder drug to fix all things. That's yet to be proven, and we're probably on the side that are more skeptical on the ability for these drugs to combat everything. If anything, we're doing a lot of calls right now to understand the impacts on the addressable market for ResMed and other participants in the industry as a twofold approach of taking the drugs and using the ResMed products. So the significant de-rating that ResMed has faced over the last month is certainly an opportunity for us and the market to consider. Firstly, if they get that margin right, that will give us some short-term relief. Will that lead to PE expansion? Possibly, but the longer-term question around competitive drugs will take longer to play out. So for us, we have a small position today. For it to become a more meaningful position, we would need to see more and more data around the addressable market, and the impacts of those drugs on the addressable market. So it's something we're doing a lot of work on, but certainly an interesting investment opportunity. Yeah, and I'm just gonna add there, like the swing away from fundamentals, because we're in this peak noise period- Mm John was talking about, with the magic pill, we call it. Yeah. Where it just, 'cause these guys are listed, they're promoting this pill to fix everything, you know, heart disease and everything. So you're in this period of Mm S ometimes your fundamentals are ignored, and the level of risk or the sentiment overrides the fundamentals, and we're in that phase at the moment. Yeah W e'd say. When do you invest? When, when would we increase our weighting? Either through valuation, if it got to silly valuation, or we saw some data to support the fact that the sleep apnea is not fixed Yeah B y these drugs. So it's, it's gonna. And we don't know the timing. Yeah. Like, so we actually gotta be patient and wait for our opportunity, until we get either of those two things. Thanks, guys. The next question is from Christine on Origin. "Does WAM Leaders hold Origin? And if so, can you comment on the proposed Brookfield takeover? This bid was made over six months ago, and the energy wholesale market has moved significantly higher since then. Does that takeover still represent good value for shareholders? That's a great question, Christine, because it is a long time, in particular in the energy transition world and for Origin, and we've seen what AGL's done in that same period, go from AUD 5 to a peak of 12. The other thing that we've got to consider when we talk about Origin is that, Octopus Energy, which is their tech solution, they own a partnership that has delivered unbelievable results. Standalone, you know, if it was listed, we would really struggle to value it, because it's done so well. So you're right in your assessment that the world has changed. You've got Octopus doing well. You've got the energy future's looking a lot better. We're gonna get a bit more clarity on Orora and the industry structure going forward from that perspective. So, does it, you know, in the future, you know, using the rearview mirror? Yeah, probably the bid undervalues what Origin should be trading at. If it, in the absence of the bid, where would Origin be trading? I'd guess it'd be north of AUD 9 right now. But you can't make that assessment in the rearview mirror, 'cause when Brookfield came to make that bid, it was a full bid at the time. They were willing to take the risk. So they arguably should be rewarded with some upside. To say the deal is completed, probably not yet, because there is still some ACCC concerns. So yeah, it's one of those difficult ones, 'cause when Brookfield made that decision to make the bid, it was absolutely fair. Mm. But looking backwards, probably a little bit on the low side. Yeah, and like, 100%, 'cause the regulation environment changed as well. Mm. Like, the Australian energy market has probably matured a little bit- Yeah I s probably the comment we'd make, where, you know, we were gonna go down this path of closing everything, and now there's probably a more moderate approach. Yeah A nd a more staged approach. So the assets are probably worth more Mm T han they were. But again, Brookfield took the risk. Yeah. So, yeah, we do own it. Do we think it should be worth more? Yes. Yeah, but But we always do. Well, we haven't been asked yet, but we may as well go off on a tangent on the energy transition. What we're learning around the energy transition is that it's gonna take a lot longer, and the practical implications of trying to convert to solar, to gas, so to solar, to wind, to other forms of sustainable energy, is gonna take far longer as the whole world tries to do it at the same time. So as the whole world is trying to do at the same time, trying to get the windmills from Siemens in Germany, and getting the people to install them, and to find the land for your solar farms, it's becoming longer and longer and longer. So from that basis, what we do need to. What we do understand more and more is that coal and gas will provide the backstop for a longer phase of this, globally. And that transition is gonna be longer, it's gonna be slower, but it's gonna be more sustainable. So we are getting more comfortable with our investments in coal, in gas, from that short period, that the stability that they will provide, the transition that will eventually occur. Yeah. I mean, it's really gas- Yeah I s where we're really most positive. Gas is gonna be crucial for the transition, and I guess that's why we like Santos as well- Yeah A nd APA as well. Yeah. Because we think they'll be, you know, critical infrastructure. We're seeing, like in Germany, a lot of the wind farms are being pulled down on maintenance issues and, you know, breaking down Yeah A nd, baseload effects. So yeah, the transition is gonna be a lot longer than people thought. So on that respect, we are Yeah A little bit more bullish on, you know, the likes of the APAs Mm And the Santos of the world. Yeah. And also, you know, energy, but on. I think Origin over AGL Yeah W ould be fair. Yeah. Thanks, guys. We've got time for just one more question. I know there are a few people we didn't get back to, so we will get in contact with you after the call, Graham, Peter, Lawrence. But the one I want to finish on is from Greg. Matt or John, can you just comment quickly on the banks, if you have an opinion on the Big Four banks? Yeah, okay. So, banks are in a really tough spot at the moment. More so not on the economic picture, but more the competition picture. What we're seeing with the banks is, generally when you're in CEO transition modes, it's a terrible time for competition. Mm B ecause everyone's trying to keep market growth, and at the moment, we've got potentially three CEOs who are gonna be leaving the Australian banking sector within the next 18 months. So competition is intense. ANZ are probably, you know, they're probably going pretty hard to make sure the ACCC thinks the market is pretty competitive as well, 'cause they really want the Suncorp Bank, which the ACCC knocked back initially. So for banks, what we're looking at, generally for banks, is the net interest margin. What are they earning? What are they borrowing for, and what are they lending for, and that difference. And at the moment, it's declining. So normally, in an interest rate rising environment, it's fantastic for banks. This time around, it's been terrible because they've competed it all away, and that has not let up. So what you see is quite often pairs of banks go really aggressive and, you know, the other two fall out of the market. And at the moment, CBA have really pulled out of the market. They went really aggressive early in the year, but they pulled out of the market. So when we assess the Big Four, what is our pecking order, I guess you could say, at the moment? And our pecking order changes based on not the fundamentals sometimes, 'cause CBA is the best bank, but it's the most expensive. But we like CBA, we like their management, but it's one of our smaller weightings at the moment. We actually still like National Australia Bank. We think they've probably been the most disciplined of the banks. And their business lending has been quite strong, and their, their reporting has been very conservative. So we like NAB. And then it falls away quite sharply after that. ANZ, we think, you know, it's got a few issues in New Zealand. New Zealand market has been-- they're not even covering cost of capital for a period, so ANZ has the biggest exposure there. We also wouldn't want the Suncorp deal to go ahead. We think they've paid, you know, overs for that business. And then Westpac, I mean, they're in a world of pain, too, trying to get their IT systems up. You know, ASIC still breathing down their neck. Even today, something came out on them as well. And they've got a big cost investment. So again, it's, it's pretty dire for the banks, you know, operationally, not like economically yet, because the arrears are ticking up. It's not, not bad yet, but I think they're just in a terribly competitive environment. And we don't think the interest rate cycle will continue, so we just can't see a clear catalyst for the Australian banks unless valuations got too cheap. So for us, NAB is our top position, and then it falls away quite dramatically. The rest are about evens at the moment. So, yeah, to get, to get excited on the banks, we'd have to see, you know, a cyclical upturn, you know, bottom of the interest rate cutting cycle. So we're actually probably at the opposite end of where we need to be. So, hard to get too excited on the Aussie banks at the moment. Great businesses, if you want to hold them for the dividend and not worry about the share prices. But for us, we're always trying to perform, so we can find better opportunities in the market at the moment. Thanks, Matt. That's all we have time for today. Thanks, everybody, for sending in your questions. We will have a recording available on our website shortly, and I'll just pass back to the guys for any closing remarks. No, I'd just like to thank everyone for dialing in, and thank you for the continued support, and we look forward to catching up with shareholders over the next period. Hopefully, we can get back on the road and do some presentations across all the capital cities. We just wanna thank continued support, and yeah, if you've ever got questions, feel free to contact us, and always happy to answer questions. And anyone we didn't get to today, I'm sure Olivia and the team will let us know, and we'll endeavor to get back to you as soon as we can. Thank you.