Pacific Current Group Limited (PAC) Earnings Call Transcript & Summary

Good morning. I'm Tony Robinson, the Chair of Pacific Current Group and the Chair of this meeting. I'm delighted to welcome you to the Annual General Meeting of Shareholders of Pacific Current Group Limited. Thank you for your attendance today. The time is now 10:00 a.m., and we have a quorum of members present. I, therefore, declare the Annual General Meeting open. As this meeting is being held virtually with shareholders present in many locations, I'd like to acknowledge the traditional owners of the country on which we are each present and recognizing their continuing connection to land, water and culture. We pay our respects to our Elders -- to their Elders past, present and emerging. Given the unprecedented nature of the COVID-19 pandemic, and consistent with public health requirements, and as with our 2020 AGM, today's meeting will be conducted online. We want to protect the health and safety of people while enabling shareholder engagement and participation. If we experience any technical issues today, a short recess or an adjournment may be required depending on the number of shareholders being affected. I'll let you know if this occurs. I'll now introduce your directors. Joining me today is Paul Greenwood, our Managing Director, CEO and Chief Investment Officer; and our nonexecutive directors, Jerry Chafkin, Melda Donnelly, Gilles Guérin and Peter Kennedy. Melda Donnelly is Chair of the Audit Risk Committee; and Peter Kennedy, Chair of the Remuneration, Nomination and Governance Committee. I'd like to thank each director for their support during the year. Others here today making tremendous contribution to our business are David Griswold, our General Counsel and Chief Compliance Officer; Ashley Killick, our Chief Financial Officer; Trent Erickson, our Chief Operations Officer; and Clare Craven Company Secretary, who will also be our moderator today. Finally, I note that Jon Corbett of Deloitte's is here, and Rita Da Silva of Ernst & Young have joined us as well. Deloitte's were our auditor for the 2020 financial year, and we'll provide Jon with a chance to talk later. Rita Da Silva of Ernst & Young picked up the audit of Pacific Current from the 2022 financial year, subject to the resolution today. The agenda for today's meeting is set out on your screen. Before commencing with the formal matters before the meeting today, I'll outline the formalities of the meeting and then hand over to Paul Greenwood, who will present an overview of activities during the 2021 financial year, commenting on strategy and providing an outlook for the business. A question-and-answer session about the financial statements, the audit and general questions of management will be held before the resolutions are put to the vote of shareholders. Any shareholder or visitor who is listening to the webcast or the audio dial-in number will not be able to ask questions. Only shareholders participating online will be able to ask questions. Only -- sorry, only shareholders participating online will be able to ask written and oral questions and also to vote on resolutions. Lumi has advised that shareholders who wish to ask oral questions online should log into the webcast via their Internet browser rather than through a VPN connection to have best access to this functionality. The notice of today's meeting was made available to all shareholders on our website. We are able to find the minutes of the 2020 AGM, our constitution and the 2021 annual report. I'll take the notice as read and deal with the business of the meeting in the order it appears in the notice. But before we do that, I'll explain how voting and questions will work for the meeting. Your Board has determined that voting at the meeting will occur by a way of a poll for all resolutions, which require a vote. So that you have enough time to vote, I'll open -- I'll shortly open the voting and will stay open until the meeting closes. As advised in the Notice of Meeting, either the original facsimile or electronic transmission of the proxy forms and any power of attorney or authority under which [indiscernible] signed must have been received at least 48 hours prior to the date of this meeting. That is no later than the 10:00 a.m. Australian Eastern Daylight Time on Wednesday, the 17th of November 2021. Any proxy form received after this deadline, including at the meeting, is invalid. Shareholders, corporate representatives and proxy holders attending today will be able to cast their votes online in real time. If you wish to vote and you haven't yet logged into the Lumi webcast and online voting platform, please follow the prompts to log into the Lumi platform, as set out in the Notice of Meeting. Once you've been admitted to the meeting voting site and the poll is declared open, a voting icon will appear on the screen, and the meeting resolution will be displayed. [Operator Instructions] If you have any questions about casting your vote online, please refer to the online meeting guide that was issued with the Notice of Meeting or call Computershare on +61 (394) 154-024. As we formally put a resolution to the meeting, the proxies received in relation to that resolution will be shown on your screen. The number will include votes on undirected proxies cast by me as Chair. As set out in the Notice of Meeting, as Chair, I will vote all directed proxies in accordance with the directions provided by shareholders, and all undirected properties I will vote in favor of all resolutions. Today, we've appointed [ Tim Hewen ] of Computershare, the company's share registry, as the returning officer. After the votes have been counted and reviewed by the returning officer, the results of the meeting will be released to the ASX and available on your website. I now declare voting open on all items of business, and you could now submit your online votes at any time. In relation to questions and comments, general business will be taken for Item 1, and questions relevant to each other item of business will be answered following an introduction to that item. Only shareholders may ask questions, and I reserve the right as Chair to rule questions as not pertaining to the AGM out of order. There are 2 ways by which questions can be asked, either by typing your question into the platform or by using the platform to ask your questions verbally. Online attendees can submit questions at any time. [Operator Instructions] Please note that while you can submit questions from now, they will not be addressed until a relevant time in the meeting. Please also note that your question may be moderated or, if we receive multiple questions on one topic, amalgamated together. For those shareholders who wish to ask a verbal question, an audio question facility is available during this meeting. [Operator Instructions] You'll listen to the meeting on this page while waiting to ask your question. If you have any issues using this system, please return to the Lumi platform. We ask that you keep your question short and to the point so that as many shareholders as possible have a chance to ask a question. The moderator will identify each person who asked the questions, read out the question and then pass the question to me as Chair, and I'll either answer the question or pass it to the most appropriate person to respond. Where we have a verbal question, the moderator will introduce the shareholder who can then ask their question. We reserve the right to rule out questions that do not relate to the business of the meeting. We will also not answer questions that are the same or substantially similar to questions that have already been answered. Otherwise, we'll endeavor to answer questions -- provide answers to as many questions as we can. I'm now going to hand over to Paul Greenwood to present the business overview. Paul, over to you.

Thank you, Tony. I'd also like to thank the Board, Pacific Current employees and shareholders for joining us today. We are excited to update you on the progress our company continues to make as well as share some thoughts about what the future holds for us. Today, we're going to cover a lot of material, and so we will move through the financial information pretty quickly because most of that information was disclosed in our year-end results. So we're going to start on Page 12, but if you're looking at the ASX release we did in the last few minutes, that might -- that's Page 3, but we have it numbered a little differently for the actual meeting here. So starting on Page 12, we simply offer a reminder of what our business is all about. And it's -- in a sense, what we do is quite simple. We purchase stakes, minority stakes typically in investment management companies, and we receive a share of their revenues or profits. If we do our job well, we'll be investing in companies that are likely to produce good performance, and it's no surprise that good performance tends to lead to increase in funds under management and increase in revenues. And so the more the investment companies that we invest in grow their funds under management, the better they do, and the better we do. From an investment perspective, our managers did -- we did well in FY '21. Though this was primarily a function of our private capital managers performing well, our long-only equity managers didn't fare as well from a pure investment performance perspective. Funds under management grew dramatically last year, grew 52% aggregate FUM. If you actually look in U.S. dollars, which is sort of more appropriate since most of the managers are U.S.-based, funds under management grew 66%. In FY '20, as of September, we actually hit $150 billion aggregate assets under management. Now the reason for this hyper growth over the last few years is really a function largely of what's gone on with GQG Partners. Last year alone, GQG grew from USD 44 billion to USD 85 billion of assets under management. However, aside from GQG, the rest of the portfolio also posted solid growth with FUM increasing 9% for those managers last year. And actually, if you look at local currency, that was actually 19%. So -- and even in the first -- or the last quarter, the quarter ending 30 September, we saw the non-GQG managers grow their FUM an additional 7%. So the growth has been broad indeed. And in terms of financial performance, we saw currency play a big role in our results last year. For instance, our NPAT -- our underlying NPAT grew 5%, but in U.S. dollars, it actually grew 17%. And we saw our revenues from management fees, which is, by far, the largest component of our revenue stream, grow 10% last year. But once again, in U.S. dollars, that's actually 23%, so a really strong growth in management fee revenues. Our expenses declined significantly last year. That's really a function of 2 things. One is the reduction in commission expenses, and the other is a reduction in travel and entertainment as a lot of our activity, and we were grounded by COVID travel restrictions. If you move on to Page 13 of the presentation, you'll see details of the financial results in both Australian dollars and U.S. dollars. And given that more than 90% of our revenues are in U.S. dollars, we believe the best way to understand the fundamental performance of the business is by viewing it through a U.S. dollar lens. As I noted, we saw substantial growth in management fee revenues from our portfolio companies. We also saw a large decline in performance fees and commission revenues. The decline in performance fees was largely related to environmental reasons such as our boutiques not being able to -- or not inclined to sell assets during the sort of the middle of the COVID pandemic because they thought doing so -- in doing so, they wouldn't attract the prices they wanted. Over time, we expect larger performance fees from our managers than we received last year. Moving on to Page 14. Page 14 is really a repeat from our FY '21 results presentation. And the point of this is just to highlight the solid growth in management fee revenues and the profitability of our business if you strip out all of the performance fees and commission revenues. So what -- I think is it sort of the organic profitability of the business, and you see that, that continues to grow very nicely. Page 16 of the presentation provides an overview of our current portfolio, and we have broken this out by Tier 1 and Tier 2 and by the economic structure of our investment in those companies. As a reminder, Tier 1 holdings are those that are intended to be the largest contributors or expected to be the largest contributors over time. And also, as a reminder, the reason we use sort of a broad array of economic structures in our investments is to better manage the risk/return profile of each investment while also maximizing the opportunity set of the investments we're able to select from. Moving on to Page 17. It is really a reminder of some of the portfolios' recent highlights. I won't dwell on all of these right now, but I would note that GQG and Victory Park have been the most dynamic situations recently. We'll touch more on GQG in a minute, but I'll say a couple of things about Victory Park. It was an investment that initially didn't get off to as fast a start as we would have hoped. However, in FY '21, the firm really started to gain traction and hit its stride. It launched 4 SPACs, which are special purpose acquisition companies, and has seen its FUM growth accelerate significantly recently. We expect more -- we expect this more rapid FUM growth to actually continue for an extended period of time. Turning to Page 18, really sort of highlights on the big recent news. I'm sure most people acquainted with our business are aware of this and which is the IPO of GQG Partners. We thought a brief recap of this investment would be constructive. To begin with, we spent years trying to get ourselves in a position to back Rajiv Jain should he ever want to start his on firm. We then engaged with him to start the company, build out its operations while also helping them raise capital into their investment strategies. At the time of GQG's IPO, PAC had already made 11x our initial investment from the distributions we've received. The proceeds we received from the IPO represented another 16x our initial investment, leaving us with a terminal stake that is worth around 65 times our initial investment, if you assume a $2 share price at GQG. We continue to be very excited about the future of GQG in part because we now own a different security. We own the common stock, which will allow us to participate more fully in the firm's future growth. And just to preempt any questions on the subject with regard to what we plan on doing with our stake in GQG, I would describe it as we will be ruthlessly pragmatic. We're obviously bullish on the business, but we will manage that position. When the escrow is up, we will manage our position based on our outlook for GQG, the availability of other attractive investment options and position size considerations for PAC. Obviously, GQG has been an extreme outlier, and no one should expect these are returns on any investment. That said, there are some lessons from this experience that we can take away and that I think are really important. The first is we need to always be planning these sort of seeds that could lead to the future investments because sometimes they take years to terminate. And this is what our investment team spends the majority of its time doing. Second is being flexible in how you partner with companies is essential. There are a lot of firms that do -- notionally do what we do that has sort of a one-size-fits-all template with regard to how they partner. They say, "We need to own X percent of a company, and otherwise, there's no deal." We actually sort of take the opposite view. If you wanted to own 40% of GQG when it started, you would have had an option of owning 0. That would have been the only thing because 40% wasn't on the table. So -- and then the third point is quality matters. So it's better to pay a premium to back world-class investors than to pay less to back a lower-quality organization. Moving on to Page 19. It's just a quick snapshot on performance. The performance of our managers has been good on average. Over the last year, it's been particularly good for our private capital strategies, weaker for the long-only managers. But the longer 3- and 5-year numbers and beyond for our long-only managers looks very competitive. I also think that you'll see long-only manager results to be -- look a little stronger at December 31 based on how they're tracking more recently. At this point, we believe all our managers have performance that I would regard as salable. So -- such that one could raise additional capital. And so those competitive long-term results at the end of the day, in our business, having competitive long-term results is all you can hope for in terms of being able to raise future capital. Moving on to Page 20. This shows the breadth of growth across our portfolios since June of 2018. So obviously, GQG is an outlier on there, but you see that the growth has been generally quite broad and significant. And that continues, we think, on a go-forward basis. On Page 22, we really just put this in as a reminder of really the 4 tenets of our underlying investment philosophy, which is we're looking for quality, sustainable growth, alignment and risk mitigation. There's a lot that goes into each of these, and I won't bore everyone with those as -- that now. But but I'm happy to answer questions around how we think about each of those components should you be interested. Moving on to Page 23 and 24. We really describe the 2 types of investments we make, and if you've been watching our company, you will have seen us make these types of investments. The first are the larger, what we term, growth equity investments. Those are firms like Aperio, Carlisle, Victory Park, Pennybacker, Proterra. And those are businesses that are growing but profitable and a little more mature but not on a decline. And then the other type of investments we make are these early-stage investments. Those are like GQG, CAMG and the Astarte, And the reason we focus on both types is that ultimately, we're trying to build a portfolio, and we want that portfolio characterized by the resilience that growth of equity-type investment. Moving on to Page 26. We really highlight some of the current market trends that are informing how we look at the world and a lot of our activities. The first one is -- and this is one that we certainly would have touched on in the past, but we believe traditional active managers will continue to feel pressure, particularly if they have domestically focused strategies. And this is true in the U.S. It's true in Australia. And this trend has been going on for a long time in the U.S., but it seems to be accelerating probably more rapidly now in Australia as super funds take in-house strategies that they once outsourced. And we think this will put downward pressure on manager pricing, particularly in institutional channels. To us, this means if you're going to invest in active equity managers, you must be, one, highly selective; and two, you need to invest in firms offering products with global appeal. That's why GQG offers things like global equities, emerging markets, that sort of thing. And lastly, you need managers with attractive pricing strategies. And I think many of -- a lot of legacy sort of oriented firms have -- are going to feel a lot of pricing pressure on their current strategy. Next trend I would highlight is, what we call, the democratization of alternative assets. This is an area we are seeing a lot of innovation. And basically, the challenge here is how do you provide sophisticated alternative products, oftentimes illiquid, like private equity and private debt to retail investors. There -- this is resulting in a lot of intriguing opportunities that we're looking at and trying to sort through at the moment, but this is going to be, I think, a major trend globally. The other one -- the next one is, what I call, evolving business models. And if you think about the Investment Management business, it hasn't evolved much in recent decades, but that's changing. And we are intrigued by some of the new models that offer clients a more attractive investment proposition. I would classify our recent investment in Astarte an example a firm with a new type of business model. And I think you'll see that some of our future investments have distinctive business models as well. Next trend, emerging asset classes. Within broad asset classes, there are always emerging sort of subsegments that are intriguing and are less competitive. We would rather invest in these emerging segments than the hypercompetitive ones. One investment -- our investment in Carlisle is actually a good example of sort of a less competitive segment of the market, which is life settlements. Some of the other examples that we have in mind or ones we actually prefer to keep quiet for competitive reasons but that are the ones that we're focused on. The last thing I'd mention, industry trends, is asset managers have become a hot commodity right now, particularly ones in the private capital space. We are certainly seeing this in the pricing at which investments get done. Our strategy to combat this is, one, increase the proprietary idea generation; two, it's not to pay -- we're not going to pay more for our investments; and three, we're going to focus more on targeting special situations where there are some reasons that other folks might struggle to underwrite those investments. So we still are very confident we can deploy capital at -- without relaxing our valuation parameters. And then we're going to move on to Page 27 and 28. These discuss the impact of the GQG listing on our financial results. Maybe the bullet points are pretty dense here, but I'll try to succinctly summarize them. The first is our company no longer owns a preferred security in GQG. And so going forward, our earnings will come from the dividends we receive on our 4% stake in GQG. For FY '22, we will receive earnings based on our old security up until October 26, and beyond that, we'll receive dividends for this -- the new common equity. We are currently working through the accounting treatment of all of this right now. If we can accrue the declared dividends that GQG intends to make for the period that those dividends relate to, then we won't have any issues with regard to reported earnings. If we can't accrue declared dividends and have to recognize them in the period they are received, then for the period ending June, we will actually miss out on 3 months of reported earnings from GQG during FY '22. That would be missed out on 2 months in the first half of the year and 1 month in the second half. Based on the estimates GQG has provided in its prospectus, that would come to about $3.2 million. It's important to note, though, that regardless of the accounting treatment, we will actually be receiving cash sooner than we would have under the old securities. So if there is an issue, and we're not sure there is, it is only an FY '22 reporting issue, and it has nothing to do with cash. At the end of the day, cash is king, as they say. In all scenarios, beyond FY '22, every 6 months reporting period would include 6 months of earnings from GQG. Also, then, historically, the structure of our security in GQG skewed results toward the second half of the fiscal year. And going forward, results won't be skewed toward the second half of the fiscal year because their -- that security has gone away. Rather, results will be more skewed towards the first half for the fiscal year, the period we're in right now. In part, the -- largely, they will be skewed toward this half because on December 31 is when a lot of performance fees crystallize for some of our managers. Going to Page 29. Just briefly discuss some of the outlook -- our outlook for the business. We can -- we expect broad growth across our boutiques. At the year-end results, we forecasted that our managers, exclusive of GQG, which has grown so rapidly that it's hard to talk about them in the context of the rest of the portfolio. But the non-GQG managers, we forecasted would receive somewhere between $3 billion and $8 billion of new cash flows or new allocations over the next 18 to 24 months. In the first quarter of this year ending September 30, they received about $780 million, so well on their way. This quarter, obviously, it's not over, but we're forecasting they will, the non-GQG managers will receive roughly another $1 billion of commitments. And thus, by the end of this quarter, hopefully, we're $1.7 billion on our way to that target. In fact, going forward, we have pretty good visibility for the rest of the fiscal year, and I'd not be surprised at all if we actually hit that $3 billion number later in the fiscal year. Note that there can be a little lag between commitments of funds under management and revenues. So some of the commitments we expect in the second half of the year may not translate into meaningful revenue during the second half but obviously bode well for revenues beyond that period. The market for investment managers is very hot, and I mentioned this earlier. And we've learned from experience that if we sell our stake in a nicely growing manager, it tends to be values that are far above the values we carry them on our balance sheet. This doesn't mean we will end up selling more assets, but I think it's important to know if we do sell assets, we believe we can redeploy that capital in a way that continues to increase our revenues and profit. So we can -- if forced to sell, we think we can ultimately add value fairly quickly once that capital is redeployed. In -- and then I guess the last thing I'd say is in FY '22, if -- we expect our revenues to grow even if we don't redeploy any capital, and we do have a lot of capital on hand now with the proceeds of GQG, and even if we don't recognize all of those GQG earnings. Obviously, if we could recognize that and redeploy capital, then you would see -- you should see significant growth. lastly, I'm going to go to Page 30. I'd like to take them in and offer some thoughts on PAC's valuation. Once again, this slide is a little dense, so it might take some while to digest it. But if you look at PAC's market capitalization, and this was a slide we've done about 2 days ago, I think, after November 17, and if you look at our market capitalization and back out the value of GQG shares, which are marked in the market every day, you can get an inferred value for the rest of our business. We did this as of November 17, and the market cap ex GQG was $158 million. Now if you then back out GQG's earnings contributions from last year, you can estimate what the PE of our business is ex GQG. And what you do -- when you do that math, you come to a PE of 9.7. So that might strike people as fairly low based on the growth I just described and the progress they're making -- we're making in terms of the inflows into the non-GQG managers. It is also interesting to note that our market cap as of November 17 had increased about $53 million from the point the news of GQG growth, even though the estimated change in book value from this development is $122 million. So PAC estimates that its current book value is around $10.46 a share. Lastly, and one other way to look at this is that $158 million of inferred market cap ex GQG has an estimated $313 million of book value supported. Additionally, there's another $24 million of value reflected in our fair value estimates that are not reflected in that $313 million book value. So that's all my prepared comments. I'll close by noting that our company is full of an incredibly talented and highly devoted group of people who have worked very hard to get the company where it is. They certainly deserve much more praise and recognition than they receive. And -- but I know they share my gratitude to our shareholders but also my bullishness on the business and excitement for what's to come. So with that, I will hand it back over to Tony.

Thank you. Thank you very much, Paul. A wonderful summary of the business and the strategy and the outlook. So I think, hopefully, [indiscernible] to share shareholders. We now come to the formal business of the meeting. The resolutions 1 to 6, as set out in the Notice of Meeting, are each to be considered as an ordinary resolution and must be approved by a simple majority of the votes cast by shareholders in time of the vote. The first item of business is the receipt and consideration of the 2021 annual report of Pacific Current Group. There is no resolution to be considered by shareholders. The 2021 annual report contains the financial report, directors' report and independent auditor's report. A copy of the 2021 annual report was made available on the company's website, the ASX platform and was sent to those shareholders who requested a copy. The financial statement has been approved by the directors and audited by Deloitte. I'll take the 2021 annual report as read. Questions may also be asked of the auditors in relation to the conduct of the audit, the preparation and content of the audit report, the accounting policies adopted by the company and the independence of the auditor. At this time, I'd like to take any general questions or comments about the 2021 annual report or the -- auditor or for the auditor. No questions to the auditors have been received prior to the meeting.

I note that we have received one question from a shareholder before the meeting, and I'll read it out and answer the question now. The question was, "Having Paul Greenwood chair the remuneration is a conflict of interest, given that there is a direct beneficiary of their decisions. How can this be better managed in the future?" I can confirm that the Chair of the PAC's Remuneration, Nomination and Governance Committee is Peter Kennedy, an independent nonexecutive director. Paul Greenwood has never been the chair of that committee and is, in fact, not even a member of that committee. That concludes the general questions received prior to the meeting. Are there any comments or questions on this item from shareholders attending online? [Operator Instructions] Moderator, please read any questions received for all our telephone questions to be answered.

Chair, we have a question from [ Melanie Rixson ]. "The financial statements of the company disclosed the net asset value of its shares to be $7.92 and are currently trading at discount at $7.39, which the company perceived to be an acquisition target. Has the company received offers to be acquired? How have management and the Board responded? Does the committee of outside directors independently consider takeover proposals? Since the company's Managing Director was appointed as its Chief Investment Officer, the value of the company's shares have fallen by 36% or 6.3% per annum over a period of some 7 years. Given the company's poor share price performance, as presided over by the Managing Director over many years, is it now not time to bring in fresh blood to lead the company? And if not, why not? Has the company considered selling itself to extract better value for shareholders?"

Well, [ Melanie ], it's a lot of questions in all of that, and I'll try to answer them all. The net asset value of the business is actually now, we believe, significantly above the $7.92 that you're talking at. So the discount at current trading price is even more significant than you're suggesting. And certainly, where -- we think that, that discount, we hope it will be closed, but we also I think that it should be something that interested parties should look at and recognize provides them potentially with a good opportunity to buy shares. Are we perceived as an acquisition target as a consequence? That's really hard to judge as the party that might be acquired in that situation. Certainly, whenever you trade at a discount, what we see as better representation of fair value of the business, you've got to be vulnerable to takeover activity. In terms of a question about Paul, Paul is actually Chief Investment Officer and stepped up to become Managing Director and CEO in those roles as well. And clearly, he does a fantastic job. No better illustration of that than the returns out of GQG. But it's not just in the returns for GQG that you can see that, you can see it in the growing net asset value position of the business and the fund flows that are coming into the boutiques that we have stakes in. It's been a tremendously successful application of capital in the period that he's been both Chief Investment Officer and Managing Director and CEO, and we certainly appreciate him in that role. And there's a recognition of the importance of him to our business in one of the resolutions coming up, where we're looking to provide him with a long-term incentive program that we hope encourages him to stay with us for a long period of time. So the -- would we consider selling? We're certainly always open to people approaching the business. And as I said, we know that given there is a discount to fair value, that we're already always in a situation where there's a prospect or a greater prospect of someone approaching us than there would be if that gap between trading price and fair value was less. [ Melanie ], I hope that answers those questions. Clare, are there any other questions?

Yes. Chair, I have a question from Mrs. [ Christine Enshal ]. The question is, "Victory Park Capital retained a large part of earnings last year. Why was this? And why do you think this will continue this financial year, excluding SPAC contribution?"

So, again, thank you very much for your question. I'll pass that one to Paul or to Ashley to answer that. Paul, Ashley, which one would be best to give a comment on that?

Yes. It's probably me, Tony. Yes. So they did retain a fair amount of earnings last year, and largely, that was because to -- because they had some opportunities to get exposure to some of this -- these SPAC -- the opportunities related to the SPACs that they have sponsored. That has proven to be sort of a wise decision for them. They've become one of the premier leaders in the SPAC space, and and we are very comfortable with that retention because of the use of the proceeds there.

I can just add, yes -- so we particularly have seen a good proportion of the energy tax distributions. I'm just making the point that the declaration of the disclosure that we made from the annual report for associates and the burning stream that's disclosed is for 100% Victory Park in this case, while we only own [ 24.9% ]. So the amount that's shown as burned attributable to Victory Park in that note is [indiscernible] as opposed to the 24.9% that we contracted.

Thank you. Thank you very much, Ashley and Paul. Clare, are there any other questions?

Yes. Chair, I have a question from [ Melanie Rixson ]. The question is, "Do the current members of the Board have the qualifications, experience and strategic mindset to help guide the company into the future? What skills and attributes does the Board make in its members? Why are long tenured board members stepping down, so new Board members may be brought in?"

That's a lovely question. Thank you, Melanie, because it provides you the chance to talk about the skills and capabilities of the Board. They really are very well qualified to their role. And there's no simple illustration of that than the list of achievements and experiences that we'll talk about with Jerry when his -- the resolution to reappoint him comes up. But all of the individuals have extensive experience in asset management and investing. That's true for each of those Board members, Melda, Jerry, Gilles and Peter. And the great joy of this Board is that it's a global experience set. Jerry is based in the U.S. and operated in the U.S. market. Gilles is based in Europe and operated again in this market for a considerable period of time. Gilles has been investing in boutiques for a very significant number of years. So, yes, a very strong base Peter adds to his experience in investing with a legal background, and it's always important to have that additional skill set at the Board level. In terms of duration, one of the things that we do know is that investing is an accumulation game in terms of experience. The more you do, the better you get at it. So longevity of the Board is actually buzz. Longevity in experience and longevity in involvement hope is something that I think you can be confident adds to the quality of the outcome. And again, you can see that in the investments that have been made at the Victory Park or the Carlier or, obviously, G2G. So I think that the Board, as I said, is enormously well experienced and qualified. And long tenure in these roles definitely adds to the quality of the outcome. Clare, any other questions?

Chairman, I have another question from Mrs. Shale. The question is what consideration is the Board giving to an increase in dividends for the first half of the financial year?

Again, thank you, a good question. Interestingly, one of the things we're looking to do is to rebalance the dividend. We're very heavily weighted to the second half, and we're wondering whether it isn't appropriate, even if we maintain the same dividend to bring forward or change the split of the full year dividend so that there's a greater weighting to the first half. We ended up with this weighting to the second half for very particular reasons, and those reasons no longer exist. We actually get good cash flows consistently throughout the year. So there's certainly something -- there's a good chance that we'll think about rebalancing that. We're always mindful of the value of dividends to shareholders. Where all shareholders are all interested in the dividend. And we look at the year-end results and work out what's a sustainable dividend payout ratio, what obligations we've got going up, we need to retain in the business. So I think that it's something that we're always thinking about at year-end where we see the actual results and certainly aware of the benefits that the dividend provides to shareholders. I hope that answer that question. Clare, any other questions?

Yes, Chairman. I have a question -- another question from Christine Shales. Question is, congratulations on the great success of GQG. With this success is the bias toward new boutiques skewed towards an equity investor that correlates to markets.

I'm going to let Paul -- I'll pass this one to Paul to answer.

We're not necessarily looking to find more investments that correlate to markets. And in fact, one of the interesting things to note about GQG and one of the -- frankly, one of the fortunate benefits is, last year, GQG gave us $9.9 million in U.S. distributions. If you assume the midpoint in their state of distribution or their payout ratio and assume the targeted net income, we would get $9.5 million from GQG this year. And frankly, they could easily do far better than that. So essentially, we're going to get -- we should get, call it, roughly the same this year as we did the last year from GQG. Yet have AUD 58 million pretax to spend on a new investment. That investment will be we're not looking for more exposure to markets. We think that doesn't necessarily add an average risk. But we're always looking at great investment managers. And at the end of the day, what's far more important to the ultimate results we produce is the growth that the manager produces. And obviously, GQG is an example where if you get it right, it can be ridiculous. But those businesses contract rapidly at all or as well. So long winded way of saying, I wouldn't bet on it, being I'd prefer to probably put it into a strategy where there's less risk and less market risk because we're not really taking much off the table. In fact, we're actually getting more risk now with GQG than we were beforehand because of the change in the security. So sort of a long cumbersome answer. But we feel that continuing to diversify, staying open to everything, open-minded everything but we'll still probably see us gain more exposures and strategies that have a more private capital flavor to them.

Thank you, Paul. And again, thank you Michelle for the comment on GQG. It certainly has been an enormous to this. Clare, any other questions from shareholders?

Chairman, I have a question from Mr. Adam [Alif]. The question is, I'm not sure if this has already been covered, but is PAC able to provide expected guidance on the expected dividend range for first half '22? Is PAC considering paying a special dividend on the realization from GQG?

So no, we haven't provided any guidance on the dividend for the first half of the '22 financial year. we do give guidance over the full year about what we are thinking about is a dividend payout ratio, but no guidance on the dividend other than to repeat the comment I made before that we are looking to rebalance the dividend. We've historically had quite a waking to the second half of the full year dividend at quite a way but being paid in the second half and we're actually thinking about whether we shouldn't rebalance that. In terms of a special dividend on GQG, the answer is no. What we focus on is the 2 parts, the retention of the capital and when it realized the reinvestment of that capital and the sale of the shares is obviously a release of capital that we'll reinvest and we're looking at some exciting opportunities for that. The earnings of the business largely cash -- profit equals cash, and we pay the dividends out of the ordinary underlying earnings of the business. So the dividend flows and the payments we receive from our holdings, the recurring payments we receive from the holdings in our -- from our investments in our boutiques, that's the core of the basis for the dividends. So, again, just repeating that the capital we recycle and the earnings we pay out a significant portion of those dividends. So no intention to change that approach. Clare, any other questions from shareholders?

Yes. Chair, I have a question from [ Alexander, Capital Investment Pty Ltd. ] The question is, "Hi, Tony. Slide 21 of the presentation and your comments today suggest that PAC is considerably undervalued. Given PAC's surplus cash position, would it not be prudent for the Board to undertake the buyback or some other material form of capital management?"

Yes. Again, thank you for the question, and again, it's a great question. I can tell you the Board thinks about all of these things constantly. We're very aware that we trade at a discount and what's the best way to close that gap. And we've obviously had a significant share price increase over the last 12 months, and we think that's sort of hoping -- or hoping that's an indication of growing interest and, therefore, the gap is going to close. But I can tell you that all of the sort of issues of capital management are looked at. And even in terms of raising capital, we're always thinking about what's in the best interest of shareholders and is an appropriate thing to do, given the sort of discount. But at this stage, no intention to do a buyback.

And Tony, it might be worth elaborating that one of the challenges inherent in our business model is that when we -- we are constrained in our ability to repurchase our equity most of the time. So, for example, the GQG IPO, we would -- our legal adviser would not allow us to repurchase -- do a stock buyback during that period because it would be done with inside information. And because our business is transactional and these transactions have many, many months of lead time, it is the norm that we are involved in some sort of thing -- discussion or one of our portfolio companies that would preclude us from doing that. So don't -- I would not interpret the lack of repurchasing -- doing stock buyback as a statement we don't believe the stocks achieved would do. It's rather we are constantly encumbered because even if it's -- if one of our companies engages is about to sell or like GQG or other ones in the past or we're about to make a large investment, we just can act on that.

Yes. Again, thank you for that question, Clare. Any other questions from shareholders?

There's one final question, Chair. The question is, "If the say-on-pay vote fails, what steps does the Board plan to take to ensure proper passage next year?"

Thank you for the question, although I am slightly confused by it. I'm not sure the pay vote, meaning the remuneration report or the resolution related to part of pause remuneration, which is obviously the pay to Paul. I'll try and address sort of both of those. The remuneration report will be disappointed if it's not supported by shareholders. We're very prudent about the rem in the organization. It's a complex issue investing in this marketplace. We've got an outstanding team of executives. And finding the right balance to keep them fairly remunerated and, therefore, committed to the business and aligned to the business and the interest of the shareholders, that's something we spend a lot of time thinking about, and we think we explained that well in the remuneration report. So certainly aren't anticipating any challenges in getting shareholders to support that resolution. And on Paul's LTI, long-term incentive that's in there, the same. We believe that it's appropriate, given the various hats that Paul wears, Vice Managing Director and CEO, and Chief Investment Officer and does an outstanding job in all of those, we're not anticipating any problems with getting shareholder support for those. [ Melanie ], I hope that answers those questions. Clare, any other question?

Yes. Chair, there's another question just come through from [ Melanie Rixson ]. The question is, "How many of PAC employees own shares in the company?"

I'm actually not sure of the answer. [indiscernible] I would certainly -- from my point of view, I would have liked to own more shares in the company. But as Paul points out, the windows where we can purchase shares is really limited, and that will apply to employees as well. We're all privy to what's happening inside the business. So the windows to acquire shares are fleeting. So it's -- there's not great opportunities for them to acquire shares on the market. So it's -- certainly, I know that all of the Board own shares and would all like to have the opportunity to acquire more. I'm not sure I can provide much more detail on that, [ Melanie ]. I hope that's helpful. And Clare, are any other questions?

Chair, no, we have no further questions at this time.

All right. Well, as there are no more questions, we'll now move on to the next item of the business, and that is the Resolution 1. The first resolution of the meeting is the adoption of the remuneration report. Resolution 1 is an advisory resolution. It does not bind the directors or the company. The remuneration report was contained within the 2021 annual report that is available on the company's website and was posted to shareholders on request. I'll take the remuneration report as read. Further details about the resolution are also contained in the explanatory memorandum to the Notice of Meeting. The resolution is set out on your screen. Before putting Resolution 1 to the meeting, I'd like to advise shareholders that the company will disregard any votes as stated in the voting exclusion statement related to Resolution 1, as set out in the notice of meeting. The directors abstained in the interest of good governance from making a recommendation in relation to Resolution 1. Are there any comments or questions on this item from shareholders attending online? Clare, please read any written questions received or allow verbal questions to be asked.

Chairman, there are no questions on this resolution at this time.

Thank you. As there are no questions on this item, I'll put this resolution to the meeting. The proxies received in relation to this resolution are shown on the screen. Please now select for, against or abstain for Resolution 1. [Voting]

So Resolution 2. Resolution 2 is the reelection of Jeremiah Chafkin as a director. Resolution 2 is an ordinary resolution requiring simple votes -- a simple majority of votes passed by shareholders present and entitled to vote on the resolution. Jerry Chafkin retires in accordance with the company's constitution and, being eligible, offers himself for election as a nonexecutive director of Pacific Current Group. And I hope to -- following, it also builds on the description I gave about the capability of the Board, and Jerry is enormously qualified to provide us support and assistance at the Board and does that and provides enormous support and assistance to the executives. Jerry is Vice Chairman of investment -- AssetMark Financial Holdings, Inc., where he is responsible for oversight of the company's investment solutions framework and providing investment perspectives to investment advisers and their clients. He joined AssetMark in 2014, bringing with him over 25 years of financial services leadership. Previously, Jerry was CEO of AlphaSimplex Group, a liquid alternatives and asset volatility management specialist in Cambridge, Massachusetts. Prior to that, he was CEO at IXI Asset Management in Boston and spent nearly a decade at Charles Schwab in a range of leadership roles, including CEO of the Asset Management division. Jerry began his career at Bankers Trust Company, where he spent almost 15 years in a variety of asset management roles working with institutional clients in the U.S. and abroad. At the time of his departure from Bankers Trust, he was the CEO of its Structured Investment Management business with more than $250 billion in assets under management and fixed income, quantitative equity and asset allocation strategies. Further information in relation to Jerry's background and experience is in the Notice of the Meeting. The resolution is set out on your screen. The directors, with Jerry abstaining, recommend shareholders vote in favor of the reelection of Jerry Chafkin as a director of Pacific Current Group. Are there any questions or comments, Clare?

Chairman, there are no questions for this resolution at this time.

As there are no more questions, I'll now put Resolution 2 to the meeting. The proxies received in relation to this resolution are shown on the screen. Please now select either for, against or abstain for Resolution 2. [Voting]

Resolution 3 is an approval to issue securities under the Employee Share Ownership Plan. The next resolution of the meeting is the approval to issue those shares. The Board believes that the interest of Pacific Current's personnel should be aligned to the long-term interest of shareholders and that Pacific Current employees should have maximum flexibility to allow them the opportunity to obtain equity interest in the company, and we've commented on this in the questions section. Further information about this resolution is available in the Notice of Meeting. The resolution is set out on your screen. Resolution 3 is an ordinary resolution requiring a simple majority of votes cast by shareholders present and entitled to vote on the resolutions. Before putting Resolution 3 to the meeting, I'd like to advise shareholders that the company will disregard any votes as stated in the voting exclusion statement related to Resolution 3, as set out in the Notice of Meeting. The directors, with Mr. Greenwood abstaining, recommend shareholders vote in favor of Resolution 3. Clare, are there any questions or comments?

Chair, we have no questions or comments for this resolution.

Thank you, Clare. I therefore put this resolution to the meeting. The proxies received in relation to this resolution are shown on the screen. Please select now for, against or abstain for Resolution 3. [Voting]

The next resolution is the approval of securities -- the issue of securities to Paul Greenwood. The next resolution of the meeting is to consider and, if thought fit, to approve the issue of 1.8 million options to Paul in his role as Managing Director, Chief Investment Officer and Chief Executive Officer under the company's Employee Share Ownership Plan as part of his remuneration under the terms summarized in the Notice of the Meeting. The resolution is set out on your screen. Resolution 4 is an ordinary resolution requiring a simple majority of votes cast by shareholders present and entitled to vote on the resolution. Before putting Resolution 4 to the meeting, I'd like to advise shareholders that the company will disregard any votes as stated in the voting exclusion statement related to Resolution 4, as set out in the Notice of Meeting. The directors, with Mr. Paul Greenwood abstaining, recommend you vote in favor of this resolution. Are there any questions or comments, Clare?

Chair, we have no questions or comments for this resolution.

Thank you. I now therefore put the Resolution 4 to the meeting. The proxies received in relation to this resolution is shown on the screen. Please select either for, against or abstain for Resolution 4. [Voting]

The next resolution of the meeting is to consider and if thought fit to approve the benefits to Mr. Paul Greenwood on the cessation of his employment or the transfer of undertaking or property of the group. There are restrictions under the corporations or -- related to remuneration for executive Section 200B of that -- prohibits the company for providing a benefit to an employee in a managerial or executive office in connection with his or her retirement from or other cessation of office without shareholder approval under Section 200E. Similarly, Section 200C of that act prohibits the company from providing advances to an employee in a managerial or executive office in connection with the transfer of the whole or any part of the undertakings or property of the company. Accordingly, shareholder approval is being sought to allow the early vesting of the options with the subject of Resolution 4 or a payment to Mr. Greenwood of the value of some or all of those options in those circumstances. The resolution is set out on your screen. Resolution 5 is an ordinary resolution requiring a simple majority of votes cast by shareholders present and entitled to vote on resolution. Before putting Resolution 5 to the meeting, I'd like to advise shareholders that the company will disregard any votes as stated in the voting exclusion statement related to Resolution 5, as set out in the Notice of Meeting. The directors, with Mr. Paul Greenwood abstaining, recommend you vote in favor of Resolution 5. Clare, are there any questions?

Chair, there are no questions or comments in relation to this resolution.

As there are no questions, I'll now put Resolution 5 to the meeting. The proxies received in relation to this resolution are shown on the screen. Please now select either for, against or abstain for Resolution 5. [Voting]

The final resolution of the meeting is to consider and, if thought appropriate, to approve the appointment of Ernst & Young as the company's auditor. The current auditor, Deloitte, have agreed to resign at the AGM in accordance with -- and we've now received the appropriate consent from [ASIC] to the resignation. In accordance with Section 328B1 of the Corporations Act notes in writing, nominating Ernst & Young as an auditor has been given to the company. A copy of this notice is contained in the Attachment A of the Notice of Meeting. Ernst & Young have consented to the employment under Section 321 of that act. [ ASIC ], as I said, have confirmed their consent to the resignation of Deloitte. I'd like to just acknowledge Deloitte and particularly Jon Corbett, who have done a fantastic job for us. Jon has been a wonderful support to the company and to the Board and has always made a significant contribution while maintaining his independence. Thank you, Jon, and thank you for being here today. The resolution is set out on your screen. Resolution 6 as an ordinary resolution requiring a simple majority of votes cast by shareholders present and entitled to vote on the resolution. The directors unanimously recommend shareholders vote in favor of Resolution 6. Clare, are there any questions?

Chair, no, there are no questions on this resolution.

As there are no questions, I'll now put Resolution 6 to the meeting. The proxies received in relation to this resolution are shown on the screen. Please now select for, against or abstain for Resolution 6. [Voting]

And that concludes the formal business for today's meeting. Ladies and gentlemen, that also concludes the voting of the Resolution 6, so I will now close the poll. The voting system will close at the end of the meeting. Once voting has been closed, all votes will be filed and cannot be changed. Could you please check that you have cast your votes on all resolution before you log out of the meeting? Clare, is there anything else we need to do in regards to closing the voting out?

No. Chairman, that's all. We can close the meeting now.

Thank you. So that concludes the business, as set out in the Notice of Meeting. On behalf of the Board, I'd like to thank you for your support, attendance and participation today. It'll take some time to count to obtain the final result. As advised earlier, after the votes have been counted of the results, the poll will be released to the ASX as soon as possible. I now declare the meeting closed. Thank you.