Djerriwarrh Investments Limited (DJW) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the 38th Annual General Meeting of Djerriwarrh Investments Limited. My name is Graham Goldsmith, Chairman of your company. The Company Secretary has confirmed that a quorum is present, and I will now open the meeting. I would like to begin by acknowledging the traditional owners and custodians from all the lands we are gathered on today and pay my respects to their elders past and present. May I introduce the people on stage with me. We have, to my right, our Managing Director, Mark Freeman; and my fellow nonexecutive directors, Catherine Brenner, Bruce Brook, Kathryn Fagg and Geoff Roberts; Non-Executive Director, Rebecca McGrath, is joining us via telephone due to a long-standing overseas commitment. We also have here our Chief Financial Officer, Andrew Porter; General Manager of Business Development and Investor Relations, Geoff Driver; and our Company Secretary, Matthew Rowe. From our investment team, we have portfolio manager, Brett McNeill; and the system portfolio manager Olga Kosciuczyk, from whom we will be hearing soon in the presentation. And we are also joined by other members of the broader investment team in the front row of the audience. I would also like to take this opportunity to introduce Kate Logan, partner of the company's auditors, PricewaterhouseCoopers, who is available to answer questions today on the audits and the preparation and content of the auditor's report at the end of the presentation. And today's meeting is being held as a hybrid meeting, and today's presentation has been released at the ASX and made available on the company's website. I remind shareholders using the online platform that whilst questions can be submitted at any time, I will not address them until the relevant time in the meeting. To ask a question, click on the Ask a Question button at the top or the bottom of your screen. And if you have not entered your shareholder number or proxy number, you will be required to provide these details before you can proceed. Once your shareholder or proxy number has been verified, you can choose to ask your question in writing or orally. If you require further guidance, please click on the virtual meeting online guide link on your screen. Please also note that your questions may be moderated or if we receive multiple questions on one topic, aggregated together. I now declare voting open on all the items of business. I'll give you a warning later in the meeting before I move to close voting. To cast your vote, click on the get a voting card button on your screen, and where prompted, again, please provide your shareholder or proxy number and follow the prompts. Once verified, a voting card will be issued and you'll be able to launch your votes. Click submit vote at the bottom of the voting card to launch your votes. And if you have multiple holdings, you will need to obtain a voting card for each holding. Shareholders authorized representatives and appointed proxies in attendance here in Melbourne would have been issued a yellow card to vote on each resolution. If you are eligible to vote and you have not received a yellow card, please see a representative of our registry in the foyer, MUFG corporate markets. If you have any questions about how to complete the voting card, please see a representative from the share registry here today. Before we move to the business of the meeting, I would like to provide some additional comments on performance and dividends. The company's objective is to provide a total return comprising an enhanced yields or enhanced level of fully franked income that is higher than is available from the S&P ASX 200 index, together with long-term capital growth delivered at a low cost. While we have been pleased with the performance of the portfolio having regard to the enhanced yield, which is currently very strong at a 2.5 percentage points higher than that available from the S&P ASX 200 index, this has been offset by a weaker than desired total return because of lower capital growth over the year. The team will discuss the factors behind this in our presentation but I wanted to assure you that we are focused on achieving our aspirations in relation to enhanced yield, whilst also delivering an improved outcome in relation to performance against the ASX 200. Whilst the performance I mentioned is specifically related to the more recent period in what has been a very difficult market for an investor such as Djerriwarrh. If we look to longer periods, for instance, 5 years the balance between income and capital growth has been more appropriate. To ensure Djerriwarrh remains an attractive product for those investors seeking regular income, we have initiated discussions with a range of shareholders, advisers and potential investors over the past 12 months about the company moving to quarterly dividends. Following discussion of this feedback, the Board believes that a move to a quarterly dividend will increase the attractiveness for existing shareholders and potential investors seeking a regular income stream. It should be noted that this change will only impact the frequency of dividends. Total dividends for the financial year we set as they currently are by the Board, taking into consideration the net operating results and a proven distribution of realized capital gains when available. As a result, it is the Board's intention to move to a quarterly dividend with the first of these to be paid in May 2026 subject to Board approval, following the usual payment of the interim dividend in February '26. It is also the intention to keep the DRP and the DSSSP in operation for the quarterly dividends. Moving on to the business of the meeting. I will take the notice of meeting as read. With regard to the minutes of the 37th Annual General Meeting, they have been signed as a correct record and are available to shareholders for inspection today. The first agenda item is the consideration of the financial statements and reports for year ended 30 June 2025. We will do this via a presentation, after which I will ask shareholders to comment or to raise any questions either about the presentation or of the auditors if you have questions about the audit. The investment team will run through performance and the positioning of the portfolio and option activity for the year ended 30 June 2025. And we'll also discuss more recent portfolio activity. And I'll now hand to Mark to start the investment presentation.

Thanks, Graham, and good afternoon, everyone. We'll try and stay upbeat in the after lunch session, which is always the challenging one for the day. So we'll just start with a disclaimer to say we're here to talk about what the company is doing. We're not giving any financial advice as such. So if you just move on to the next slide, just to reiterate give an overview of Djerriwarrh. So Djerriwarrh is one of the largest focused LICs on the market. There are now many LICs listed on the stock exchange. It was established in 1989 and listed in 1995. Obviously, part of the benefits of being in an LIC is a transparency you get. The GAAP governance standards, and obviously, there are a number of very public incidents of mismanagement of financial affairs going on and so to be involved with a listed company, with the Board of Directors, audited financial accounts. I think it's very important, and it should give you confidence about where your investments lie. And importantly, being an LIC, the shareholders are on the management rights of the company. So there's no external manager on the side. There's no fees going to another party. There's no performance fees going to another party. We are simply employees of the company and you are the shareholders and owners of the company. Djerriwarrh is obviously part of a broader group of LICs, which include the Australian Foundation Investment Company, AFIC, AMCIL and Mirrabooka. So with that, there's a broad investment team, that really covers most of the market. So if we just move to the next slide, as Graham pointed out, we are seeking an enhanced yield at Djerriwarrh and the way we do that is primarily by selling call options over a portion of the portfolio usually around 30% to 40%. And what a call option does, it gives you income, but essentially locks in a selling price on the stock. So you are trading away some of the blue sky to generate income for the [ now ]. The table below just shows you what that has resulted in. So with those 2 forms of income being option premium, and dividends plus the franking, we've been able to generate a yield around 6.4% when you include franking, which is 2.5% higher than what it should get from being in the broad-based market, which is around at 3.9%. So that's a very strong enhanced yield against what you get out of the index at this point in time. If you move to the next slide, but what we are giving away is some of the upside, as I said, if you look at the 5-year number, that's close to what we'd want to be doing in a strong market. So still give you solid total returns. In that case, it was around 11.2%. You get most of that through franked dividends. But we're still slightly under a very strong market, and that's what I talked about. We give away some of the upside to give you much stronger dividend yields now. And it's probably not surprising that most investors in Djerri, have their investments as part of a super fund or in pension phase super fund because you get all the value of the franking credits that come along with that. So I see Djerri is sitting somewhere between and we have put on this slide a sort of 180-day bank bill thinking about fixed interest products. If you're all equity exposure, you get the green bar, Djerri kind of sits as a total return somewhere in between, but closer to what you would get out of being in the market. Just moving to the next slide. This is obviously quite topical at the moment. So we're seeing is a lot of listed investment companies trading at very large discounts on the market. This is a bit of a new phenomenon we're seeing. It is impacting most of the sector. And we've seen many reasons for this to occur over our time. And I think a lot of those reasons seem to be coming together at once. We've got a hot market. LICs have always lagged in a hot market. People are chasing gold stocks and tech stocks and all sorts of things, and we do get left behind when that occurs. Interest rates have risen. So there are alternatives in term deposits and fixed interest. So there's a little bit of interest taken over the sector through that. I think there have been some underperforming LICs with external managers, and I think they muddied the waters. And we need to keep highlighting that our LICs are internally managed, which is different to most in the market. As I said earlier, where there's no external manager and fees. So it's a different product to the other LICs in the market. I guess with that, I always got taught to look for value when you see situations like that, I'd just say, well, that seems to present value to me because it means if I can buy stock at a discount, that means I'm going to get an even higher yield in what you normally get on the portfolio. So why that persists, so -- as I said, I see value. But I think perhaps over the course of time, I'd expect to see some of those gaps start to narrow. But with that, I'll pass over to Andrew Porter, our CFO, to talk through the results.

Thank you, Mark, and good afternoon, ladies and gentlemen. So as is traditional, I will run through some of the key financial metrics briefly, and Brett and Olga will go through the portfolio and investment performance. So the first figure that you see there on the top left is what we term the net operating result. This is different from the accounting net profit figure as it excludes the impact of options that have not yet expired, being exercised or closed out. In other words, where we still don't know what the financial impact of those options will be. Perhaps more relevantly, though, it is also the figure that the Board uses when setting the dividend of $40.8 million being equivalent to $0.155 per share. So the $40.8 million compares to $40.3 million last year. The reduction in dividends that we received as expected dividends from the major resources companies like BHP and Woodside were expected to be and were down, and we had been exercised on a lot of our bank stocks, which, of course, we all know a large dividend payers. This was offset by an increase in interest income and a reduction in interest costs paid, the former due to higher interest rates and the latter as Brett will come to caused by higher cash balances during the year. Option income was up marginally, which considering last year's figure was comparatively very high, was noticeable. Although as Brett and Olga will note, this does have an impact on portfolio performance in a rising market as stocks are called away and option premium booked. As noted earlier, the increased operating property enabled the Board to declare a slightly increased dividend for the year $0.155 against $0.1525 last year. It is worth noting again, Djerri's objective is to pay a higher dividend yield than the market. This means that even in maintaining this, the actual dividend in terms of cents per share may change as the dividends at the market pays reduce. We are already seeing both BHP and Woodside dividends, for instance, lower this year again than the equivalent last year, but please note the use of the word may. Djerri does have a flexible dividend policy. For the first time in many years, Djerri was able to attach an LIC gain to its dividend as we pay tax on some of the realized gains this year. $0.05 of the final dividend was sourced from realized gains, which means that shareholders that do pay tax either as an individual or through a super fund will be able to claim a tax deduction. So please ensure that your accountant remembers to include this in your tax return for the year without quoting Kerry Packer exactly, we would not wish to see shareholders pay more tax than they should. After allowing for the final dividend, Djerri still had enough franking credits to pay $0.23 worth of franked dividend, so roughly 18 months' worth of the current dividend. We think that this is an appropriate buffer against what may come. The portfolio return figures are there. Mark discussed them already somewhere behind the market, but Brett and Olga will run through some of the reasons behind that later. The MER or management expense ratio is the last box on the screen. This is a measurement of the cost of running the company. This is expressed as a percentage of the costs incurred over the average portfolio for the year and is equivalent, therefore, to $0.47 per year for every $100 invested. As we've been asked the question before, I will note that it is a management expense ratio. So traditionally, it does not include interest costs. As even if there were no costs associated with running the company, if the portfolio had debt interest would still be incurred, and such an inclusion would distort the value of comparison to ungeared entities. Because the portfolio had been and has been ungeared throughout the year, the portfolio is smaller than would otherwise have been the case. Again, Brett and Olga will run through this. And that does mean that the MER is larger than it would have been had the portfolio being geared. The costs themselves increased by inflationary amounts, one of the largest increases coming in the share registry costs actually, where we incurred one-off costs associated with moving share registries. This will result though in savings in future years, which was one of the main key considerations of the move. When we calculate the MER, we also include the profits that Djerri receives from its associate which is the company that actually employs all the staff, so not the directors, the work across all 4 LICs. The profit from AICS, as the company is known, was considerably down from the previous years largely due to staff changes and previous remuneration decisions. Similar changes are not expected this year, but the AICS model, as Mark has alluded to, is based on a recharge basis. So the profit should always be small. The previous year with some staff leaving and not being replaced in the -- until the '24/'25 year was unusual. The Board will always keep costs under close observation and we believe that for a company and portfolio like Djerriwarrh's with a substantial amount of work involved with the options, the costs and MER remain competitive. There are also costs associated with maintaining a company structure, which are included in the MER. We continue to believe that this LIC structure is one that has worked and continues to work very well for shareholders providing transparency, the benefits of corporate governance and most importantly, the ability to create profit and franking reserves to help supplement the dividend where necessary. Unlike an ETF unit, which has to pay out income as it is received. And nowadays, it's in a form that requires additional components to your tax return, which has costs incurred by your accountant unlike a simple dividend. Having said that, we do acknowledge the downside, which Mark has covered, namely the fact that the shares do not always trade at NTA. So as ever, I will be here to answer questions either at the end of the presentation or after that over a coffee. So with that, I'll hand over to Brett. Thank you.

Okay. Thank you, Andrew. Good afternoon, everybody. Great to see you all here today. So I thought in this section of the presentation, Olga and I would look to give some more detail on the key factors behind our recent performance as well as an update on the current portfolio and our outlook on the market. We wanted to start this section by doing a recap of the last 5 years on our key objectives. So obviously, Mark and Andrew have addressed performance in the yield, particularly over the last financial year but it would be good to take a slightly longer-term view. So starting with our primary objective, which is our enhanced yield. So our enhanced yield is the difference between Djerriwarrh's dividend yield, which includes the value of franking credits paid and we showed that in the light blue bars here versus the ASX 200 dividend yield also including franking credits paid, which are the orange bars. And we can see that our enhanced yield has been consistently strong over the last 5 financial years, which has been very pleasing, particularly in the most recent financial year where Djerriwarrh's dividend yield of 6.5%, including the value of the franking credits has been 2.3 percentage points above the equivalent yield on the broader share market 4.2%. So a very strong level of enhanced yield. The enhanced yield has been above 1.2% in every one of the last 5 financial years, and it continues to be our target to deliver an enhanced yield of at least 1.2 percentage points above the market's dividend yield. One of the key components of the ability to deliver the enhanced yield has been our ability to grow the dividend over that same time period. So we show here on this slide, Djerriwarrh's dividend per share that has been paid over the same 5 financial year periods. And as we can see, it's increased from $0.11 back in 2021 to $0.155 in 2025. So good growth in the dividend as well as an enhanced yield. And we think it's important at this point to point out that both of those factors enhanced yield in the growth have been achieved in what we think is a very sustainable manner. And by that, we really want to stress that the dividend has been fully covered by the net operating profit in each of the last 5 financial years. So we haven't had to rely on paying out reserves or realized capital gains to generate that enhanced yield. And on this slide here, we address how Djerriwarrh's dividend has grown compared to the growth in dividends from the broader share market. So what we're showing here is that for the last 5 financial years, the growth in those dividends from the base year of 2020. And we can see that Djerriwarrh's dividend per share, which is the light blue line, has grown at an average rate of 2.1% per annum over this time period compared to the growth in the market's dividend yield, the ASX 200 dividend which has only grown at 1% per annum. So pleasingly, Djerri's dividend has grown more than what dividends from the market have grown. And it's been especially the case in the last 2 years where we've been able to grow our dividend despite the market's dividend falling quite sharply over the last 2 years. So that covers the income side of our objective. The second objective of Djerriwarrh, as Mark talked about, is to deliver a good total return over time, which really should come through in the NTA performance and an attractive total return being the dividend plus the capital growth that we can generate compared to the broader share market. We show here on this slide the total return metric for the same 5-year period. Starting back in August 2020 with Djerriwarrh being the light blue line and the broader market, the ASX 200 being the orange line. So over this time period, Djerriwarrh has underperformed the broader share market in terms of total return with a total return of 11.2% per annum compared to the market at 13.8%. So hence, we have trailed the broader share market in terms of total return. What the chart shows, though, is that the gas for the underperformance has primarily occurred in the last 18 months, especially in the last 6 months as the market rebounded really strongly post the April 2025 tariff-induced selloff. So the 3 key reasons that we give to this underperformance on the total return sense would be, firstly, the call option exercises that have occurred, so writing call options to generate income has acted as a drag on our -- on the capital growth that we've been able to deliver. So that's the first reason. The second reason is that we've been positioned quite defensively over this time. And really, that's been in the case of holding some more cash than we otherwise would at times when we've struggled to find value in the market. So in a market that's performed very strongly, the cash has acted as a drag. So the defensive positioning. And the third one is some specific stock positions that we'll go into. So I was going to give some more detail on the extra reasons behind that performance, and then I'll return at the end to talk about the current portfolio and our outlook statements.

Thank you, Brett, and good afternoon, everyone. Our main investment objective is to pay our shareholders to enhance dividend yields. And to achieve that goal, we generate income by writing call options against select portfolio holdings. On this slide, we show the performance of the market as defined by our benchmark, the ASX 200 index overlays with the top down view of our portfolio's call option coverage. We started this calendar year with option coverage of 40% which is at the top of our normal range between 30% to 40% to reflect our view that the market looks expensive. However, aside from a short-lived market selloff, we saw in March and April, the ASX 200 continue to raise. In hindsight, we position our portfolio defensively too early, which led to significant option exercises. Subsequently, our option coverage dropped to 32% at the end of the financial year 2025. Since then, we rebuild our option coverage to over 40% as we continue to see valuations across the market at expense. Our portfolio recently has been defensively positioned. As you can see on this chart, we maintained a very strong balance sheet with a net cash position in the last 2 financial years despite our target gearing of 8% to 12%. This is mostly a result of significant option exercises. As we continue to view the market as expensive, we did not reinvest all the proceeds from these sales back into the market. Carrying a net cash position for most of financial year 2025 in strong markets was a drag on our total return. However, we will continue to be measured and patient in our approach to reinvesting that cash back into the market. We are well placed to take advantage of any opportunities that may arise like we did in the March and April sell-off when we invested over $120 million across high-quality companies that were trading at attractive valuations. On the next 4 slides, we will discuss key stocks that contributed to our underperformance. Starting with Commonwealth Bank, which was the single biggest detractor to our total return. Last financial year, we were underweight CBA shares, while the share price was up 49%. As you can see on this chart, CBA is trading at the lowest dividend yield in over 2 decades. At just 3%, CBA's dividend yield is now lower than what is available from the broader market. The expected earnings growth of CBA for the next 3 years is also minimal. These 2 factors make it an unattractive investment for us. As such, following significant amount of call option exercises, we decided to actively sell our small remaining holding, exiting the stock entirely at the share price of $187. Since then, we saw the share price decline of 15%. However, it is still well above where we would consider buying back this holding. The company remains at the top of our watch list, given it's a high-quality company that is managed exceptionally well. Our overweight position in CSL was also a drag on our performance. On this chart, we show CSL's earnings in red as well as its share price in black. At $194, CSL share price is back where it traded in 2018 despite solid earnings growth the company has delivered since then. In our view, the significant rating reflects the market's loss of confidence in management's ability to continue to grow earnings at historical levels, heightened external risk factors, in example, the impact of Trump's tariffs and policies as well as overall lower quality of the company following the Vifor acquisition. We share some of these concerns and question some of the company's recent decisions, including the strategic rationale of the planned spin-off of Seqirus. However, we do think that the correction in the price multiple is too extreme. CSL is now trading at 16x next year earnings, which is at a 10% discount to the indexes multiple. In our view, the current share price does not reflect CSL's future earnings potential and leadership position in growing markets. We believe that CSL is well positioned to deliver high single-digit earnings per share growth over the medium term and in conjunction with limited risk of further derating, makes it a very attractive investment for our portfolio. As such, CSL remains one of our biggest absolute and relative portfolio positions. Another blue-chip company that has been a drag on our performance is Woolworths Group. As you can see on this chart, Wooly's lost 1/3 of its value as defined here by its market capitalization over the past 2 years. Meanwhile, Coles' market capitalization continued to increase with the value gap between the 2 narrowing from $25 billion just 2 years ago to just $1 billion now. The markets have given up on Woolworths following a long list of external and internal issues, including poor strategic decisions and supply chain challenges. All these issues negatively affected Wooly's sales momentum at a time where their biggest competitor, Coles is executing exceptionally well. Woolworths' new CEO, Amanda Bardwell, and her team are focused on turning this business around. It will take some time, but we believe they can do it given the high quality and scale of their store network as well as their strong e-commerce business that reaches over 24 million customers each week. The company at current valuation offers a 5% gross up dividend yield and a mid- to high single-digit earnings growth over medium term, making it an attractive investment even if the company does not rerate to its long-term average multiple. Both supermarkets continue to be amongst our biggest holdings as they provide strong and defensive cash flows, which translate to solid fully franked dividends for our portfolio. ARB is one of our top 10 active positions in the portfolio. The company underperformed the market in FY '25 by 25%. The 2 key drivers of ARB's underperformance were cyclically weak new vehicle market in Australia and concerns about the impact of the U.S. tariffs on ARB's business. We took the view that ARB is a high-quality retailer with a very strong track record of growing sales, as you can see on this chart, in a variety of market conditions. We backed the management to navigate these short-term issues and cycles just like the company did in the past 2 decades. Taking a long-term approach so us up to our position at the time of market capitulation during the market sell-off in March and April at prices well below $30. Since then, ARB's share price is up 26%. And pleasingly, the company also announced a special dividend. So with that, I will pass to Brett.

Okay. Thanks, Olga. So I'll give an update now on the current market as we see it and our portfolio. So we've talked a fair bit about how we see the market at the moment being expensive, and hopefully, this illustrates this. So this is the forecast dividend yield of the broader share market, the ASX 200 plotted over the last 20 years, so quite a long-term chart. So the forecast dividend yield for the market is currently just 3.3%, which is before franking credits. And I think what's important though is this is well below the 20-year average of 4.5% and it's the lowest level that the dividend yield of the market has been over at any point really in the last 20 years. So quite extreme. So overall, this is one of many factors that to us suggests that the market is expensive right now. And also when you compare it to other alternative investments such as the current cash rate being 3.6% and 10-year government bonds being 4.2%. And interestingly, other long-term valuation metrics, real fundamental valuation metrics such as price-to-earnings ratio and price-to-book ratio basically come to a similar conclusion that the market overall does look stretch, quite expensive. So with that backdrop, what we've got here is a snapshot of our current portfolio as at our most recent month end, which is August 2025. Some of the key statistics are shown on the left-hand side that we own 42 stocks in the portfolio. Total value of $880 million. Call option exposure, as Olga mentioned, is 40%, which is basically the top end of our typical call option coverage range, and we have zero put option positions in the portfolio at the moment. The top 20 holdings are listed in order of value on the right-hand side shown. A couple of things to pick up on. We've got quite a large weighting in resource stocks at the moment. So really in the large cap diversified miners such as BHP and Rio Tinto, but also energy giant Woodside, where we see good value, good fully franked dividend yields, solid balance sheets and an attractive point in the cycle. So we've got larger-than-usual holdings in those 3 stocks. Transurban is still a big position for us, so our third biggest holding at the moment. We think it offers a good dividend yield, 5%, which we expect to grow at a good rate over quite a period of time. So Transurban is still a big holding. We own less Telstra today than we did certainly 12 and 18 months ago, but it's still a large holding in the portfolio, a good dividend yield, 4.5% fully franked, and we're confident that, that can grow and that they're in a good attractive industry with a great market position. And out of the major banks, only ANZ and Westpac are in our top 20 now. We still own some NAV, but it's not in the top 20. And as Olga described, we don't own any Commonwealth Bank at the moment purely based on valuation. So finishing up this part of the presentation with some outlook comments. So as we've talked about, we think the market is expensive. We struggle to find value. And so we think at this point in time, it's prudent to remain defensive, defensively positioned and have a net cash position right now. But we are ready to invest when we see opportunities as we did in a big way in the April 2025 sell-off, there's a number of high-quality stocks that we'd be more than happy to buy at better prices, a lot that we've talked about today such as Commonwealth Bank, but also companies like Wesfarmers, JB Hi-Fi would be right up on our list if we did get a broader sell-off that we could add to. We've been doing some buying though lately, but it's been very selective in existing companies in the portfolio. So over the last couple of months, particularly during reporting season before these stocks went ex dividend, we added selectively to Computershare, Woolworths, Telstra, ARB, also bought some more Region Property Group, our preferred Property Trust and also Transurban as its share price came back. So we have been doing that selectively, and we'll continue to look for opportunities in the absence of a broader market sell-off. So where does all that leave us in terms of the dividend income and the option income that we need to generate at the level of enhanced yield that we're targeting. We think that the dividend income, the good holdings that we've talked about in the major miners such as BHP and Rio as well as Woodside set us up well for good fully franked dividend income, but it will really be our ability to deploy our net cash balance into high-yielding, high-quality stocks that will enable us to generate the extra dividend income for this financial year. And with the option income, we've already got a good amount of option income written in the books. But importantly, we've still got flexibility to write more over the remaining 9 months of financial year 2026. So hopefully, that's given you some extra detail on factors behind recent performance, how we see the markets and how the portfolio is set up. So before we go to questions, thanks for your attention. I'll pass back to Graham.

Thanks very much to all of those who participated in the presentation. So we've now arrived at the time where I'd like to invite questions from our shareholders. For those in the room, we have microphones available. And if shareholders could please state their name when addressing the meeting and ask all questions through the Chair, and I'll either address the response or pass it to the appropriate person. But perhaps we might start with any that are online. Geoff, do you have any questions?

I've got a couple here, Graham. So this one is from John Whittington. He's a volunteer with the Australian Shareholders' Association standing in for Steve Van Emmerik, who is unwell. Today, we hold proxies for 48 ASA members and nonmembers for over 1.3 million Djerriwarrh shares, which, if consolidated, would make us the fifth top -- make us fifth on the top 20 shareholder list. Thanks go to you, the Board and all employees for the year's result. Mr. Chairman, when was the current audit company first appointed? And when was the last competitive audit tender held?

Thanks very much, Mr. Whittington. The -- I'm not sure of the date when originally appointed, but we did hold a full audit tender in 2017, which was the last time we held an audit tender and PwC won that tender.

PwC would have been appointed at the formation of the company, so in 1985 because it makes sense, of course, for the 4 LICs all to have the same auditor. So at that tender, all 4 Audit Committee chairs or representatives to make a joint decision.

Thanks, Andrew.

Okay. A question from John Whittington from the Australian Shareholders' Association. Could you outline any recommendations and/or improvements which you have actioned in the past year to strengthen the company's resilience to cyber threats?

Thanks again for that, Mr. Whittington. I might actually pass that to Andrew Porter, our CFO, who would deal with that at the AICS Board.

Yes. Thank you. And Graham is a member of the AICS Board that looks after this on behalf of all of the LICs. I think the first thing that I would note is Djerriwarrh is not the same as a traditional company. So what do I mean by that? We've got no supply chain. We've got no access to customer records via the Internet. You can't transact with us over the Internet. We actually have no customers. So we've got no customer or no payment data. Our shareholder details, all your details are maintained by the share registry. They provide audited controls reports to us on an annual basis and present to the Board annually on cybersecurity. We've got no personal information recorded on our systems. We actually had an internal audit very recently to confirm that to us. What I mean by that is we are regarded as a low risk in terms of cybersecurity. So when an attack happens, because it will happen, I think every organization should accept that they will be the target of a cyber attack, whether deliberately, probably not in our case or on a what they call a drive by basis. The damage that can be done can be limited and the Board and management know what to do. So those are the steps we've taken. It is something, though, having said all of that, we do take seriously. We have an outsourced IT supplier who ensures that our systems are regularly patched. Tim [ Start ] from AICS is here, who liaises with them on a daily basis to ensure that they do what they should do and they report to us regularly on that. As you all know, patching is probably the most important thing that you can do with regard to cybersecurity. We have a 24/7 external monitoring of our systems, everything going in and everything going out is monitored, and we have regular meetings and reporting with that organization, which provides our securities operation center. We are currently undergoing a NIST review, which is a particular framework for cyber resilience. We have had an Essential Eight review and came out favorably on that, but we've moved on to the next level to have a NIST review that's ongoing at the moment. And we also, on top of all of that, have an organization that provides separate cyber training to all our staff. So that's phishing exercise is what to look out for. And I know that the staff all enjoy getting those e-mails that require them to complete their cyber training. Hopefully, that gives the questioner some idea of the steps we're taking.

Thanks very much, Andrew, and thanks, Mr. Whittington, for the question. Do I have any questions in the room?

Thank you for the presentation today. My name is [ Geoff Fuller ] I'm having a look at the share price records since early 1999. And I noticed from one of the investment objectives from the review says to provide attractive total return, including capital growth over the medium to long term. I know the share price now is less than it was in early 1999. Could you please explain why -- I mean, from an investor in Djerriwarrh, I regard that as an appalling -- zero capital growth, it's negative capital growth over 25 years. Could you please explain what's going on there?

Well, thanks very much, Mr. Fuller, and I'll perhaps make some comments and then pass to Mark. Obviously, we don't control the share price that really does get driven by the market. But it will obviously take into account what we're doing in relation to dividends, which we do control and the portfolio selection. So during that longer-term period, we also had a long period where our share price was trading above NTA. And as Mark outlined in the presentation, share prices for LICs have moved now to below NTA. So that, in fact, has had a big impact on capital growth over that period. So as I noted in my introductory comments, that element of what we're trying to achieve in terms of both the enhanced yield and the capital growth. That element, in my mind, has not been as good as it should have been, which you've highlighted. And that's something that we're very focused on going forward. Mark, would you add anything?

Yes. Look, the other thing I'd add is that in those early years, we went through quite a number of years where we were paying out very high dividends. And the gap between the yield on Djerri in the market was extremely high. And so that balance wasn't quite right in terms of how much dividend do you want to be paying out versus how much capital. So we're heavily skewed for many years towards dividend and franking credits. The outcome of that was it wasn't much capital growth. And so what we've been saying more recently, which was part of -- we sort of call it the strategy reset, where we reset the dividend at a more sustainable level. And the objective was then to have a more stable yield in terms of what you get out of Djerri against the index, i.e., lower than what we were, but then start to produce some capital growth. So that's really the comment I always make, we would just -- you got most of the returns from dividends and franking credits, which you need to include in your calculations for total returns.

Just offer a little bit more detail. Even if we forget the first, say, roughly 10 years from 1999 through to pre-GFC, I'm looking at a share price here of about $5.50 in August 2007, so shortly before GFC. So that's been even worse performer from 2007 through to now.

Yes. So I'd have to go back and look at where the share price was against NTA because obviously, we had -- did have some periods where you went to premiums. So perhaps after the meeting I get some dates from those, and I'll go back to the office and have a look because they are the factors. It's where the share price was against NTA, where we at a premium compared to the discount now, but also what you've received out of Djerri in terms of dividends and importantly, the franking credits. And so an accumulated return, you need to involve all those components in working out what return you've had on your investment.

Sorry, Mark, I've got the 15-year figures for the share price plus franking, not going back 20, 25 years. So if we include the share price plus franking, the return over that period has been 6.4%. So it's basically yield at the end of the day.

I'll get Mark to address that with you after the meeting. I turn back to online. Do you have any more questions?

I have a few questions here, Graham. Which of the proxy adviser services does our stable of LICs, well, I guess it's related to Djerri, currently ascribe to. And could Mark, please comment on which upcoming AGMs he's focusing on in terms of the group potentially voting against the Board's recommendation. Also, how many companies will our team meet with during the current AGM season? And how does this compare with the earnings season? Are we more focused on earnings and governance? And if serious about governance, why not publicly disclose how we vote our shares as most industry funds do?

Yes. So look, we get this question regularly, but we don't disclose the way we vote. The industry funds do it, and that's their decision. Our decision is different. We don't feel like there's a need to it. In fact, we think we've got an extraordinary relationship of trust with the companies that we invest in, given the way we do it, they really value our input and advice. And we clearly want the best investment for the portfolios and the best returns and governance is a critical part of that. And as you all know, if you've been involved with any of these LICs, governance issues were -- they've always been an important part of our process. We want well-run companies. And when I say well-run companies, it encompasses everything that an appropriate Board does to ensure a good business. And the first thing I got taught 33 years ago by Bruce Teal was who's on the Board and what do they like? And that's governance. That was what the first thing Bruce was telling me, governance is critical. So it has always been important input in what we do, critical. And nothing's changed, and we say that consistently, trust in the people is such an important part of an investment. But we don't feel the need to tell the world how we vote. We think we get better results by being firm with companies when we're seeing behavior we don't like or if we don't like the way they run the business and treat shareholders, they hear from us. But they respect our views and they really value our input, and that's the relationship we have, and we think that works really well. But we do take advice along the way. For the last few years, we've been able to access information from CGI Glass Lewis and Ownership Matters. We read their inputs, we bring them if there's something we want to discuss. But at the end of the day, the Board and the investment committee make those decisions. So we use -- we don't blindly follow their recommendations. We use them as a source of information, and we make up our own minds. And as you can see with the caliber of directors we have on our Board, they understand these matters very well. And we vote. We think voting is a really important part of the process. I'm not going to say upfront, I mean, to say which ones we think we're going to vote against. It's just not something we're going to talk about at this point. We address each matter as they come along, and they come to the committee to make -- so it's the committee that makes those decisions, not me. And we address them as they come along. And as I said, if we think there's something we need to vote against, we will.

Thanks very much, Mark. Are there other questions in the room?

Look, I know Djerriwarrh sort of does a lot of option trading. When you pick shares, are you picking them mainly because we can trade options on that? Or is it -- we're looking for capital growth. Do you think maybe picking out shares that we can write good options on affects maybe how much capital growth we're getting?

I might ask Brett to address that.

Yes, sure. The primary job when we're picking shares is to generate a good return from owning the shares being dividend income and capital growth. The options bid is a separate overlay on top of that. The only constraint is we need to make sure we have a portfolio where we have enough companies that we can write options over because you can't write options over every stock that's listed in the market. So we need to have the size and the liquidity to the turnover that we can write enough options over the portfolio to generate the required option income. But we would never buy into a company just to write options over to generate option income. It has to have a place in the portfolio for dividend income and/or capital growth.

Thanks very much, Brett. Thanks for your questions [indiscernible]. Online?