Plato Income Maximiser Limited (PL8) Earnings Call Transcript & Summary

Calvin said we're all ready to go. It's just after 10:30. So I think we should start the meeting. A very warm welcome to everyone, shareholders, colleagues, guests. Welcome to the Plato Income Maximiser 2022 Annual General Meeting. Thank you very much for joining us in person. We have a much better turn out than we had for our previous AGM earlier this morning. So it's great to see a lot of familiar faces as well, and that also for joining us online. Before we move to the agenda, I'd like to introduce my fellow Board members. We have Lorraine Berends and Katrina Onishi, who are the Independent Non-Executive Directors together with me as the Independent Non-Executive Director; and Chris Meyer, who's part of the Pinnacle Group. I was going to introduce Don sitting in a chair, but he's not that well today, but he's joining us online. So Don, we can see you. Could you raise your hand to let us know you can hear us? Okay. So welcome to Don, and he's been having honey and stuff to make sure he can present his investment management update a little bit later. Calvin Kwok, the Company's Secretary, is here as well, and we have the auditor, Chris Chandran, who's down here in the front row from Pitcher Partners, and he is available to answer any questions shareholders may have on the 2022 financial statements. Calvin has informed me that we have a quorum and I declare the meeting open. I'm also advised that there are no apologies have been recorded prior to the commencement of the meeting. The agenda is up on the slide. It's pretty straightforward. I will provide a short Chairman's address, and that has been released to the ASX this morning. We'll then deal with the formal business of the meetings, which are the usual matters, see if there are any questions on the financial statements, remuneration report and reelection of directors. And then the highlight for me anyway is the investment manager update, which Don will provide. And Peter Gardner is here as well from Plato, and Peter is also available to help with that process -- to help Don with that process. And after that, there'll be an opportunity for any questions shareholders may have either online or in person on the investment side. You're welcome to ask questions on the formal resolutions. But if you do please limit them to the matter being considered and by the resolution. The Notice of Meeting has been circulated to shareholders, and I propose to take it as read. I'll now move, if I may, to the Chair's address. Don, if you could get that slide up. We have tech expert running around, going to correct this. Okay. Perfect. All right. Great. So the Chairman's address. I thought it's 5 years since we listed -- over 5 years since we listed in May 2017. And I thought it's appropriate to remind existing shareholders who've been with us since the start and also new shareholders on really what Plato Income Maximiser, PL8, seeks to do. To my knowledge, we are the first and only Australian-listed investment company that pays monthly dividends. And it's our intention very much to continue to do this. I anticipate a question from the floor on whether we'll be able to do that. We'll come to that in due course. And we have approximately $575 million of pretax assets, you'd be able to see that on the screen if Don's head wasn't in the way. And that makes us one of the larger LICs on the ASX. And there's an advantage -- sorry, yes, that's right. And it is one of the larger LICs and that is an advantage in terms of liquidity. And we've been trading at a premium, which is we're very appreciative. We don't take for granted. But one of those is the factor of size and the liquidity and the performance of the fund manager in doing what we said we would hope to achieve when we listed in May 2017. And that's probably an appropriate time to move to the next slide, if we can, [ Shaw ], which is the company performance. And the portfolio performance since we listed has been an 8.9% annualized total return from the inception date, which was as I said May 2017 to 31 October 2022. And I would like shareholders to note that, that performance is after fees and expenses. And there is a debate and flexible practice among the LIC sector as to whether you provide your performance before or after fees, and we've got [indiscernible] got representatives here, so I won't go into that particular debate. But we do believe it's appropriate certainly for Plato to show it after fees because that is really what the shareholder return represents. The income to date has been 7.6% annualized income and the TSR performance, which is the total shareholder return, is 7.4%. The total shareholder return measures the change in the share price and the dividends that have been received over time. That is slightly less than the portfolio performance and the income because the TSR performance doesn't provide you with the -- it doesn't include the benefit of franking credits. And that obviously is very important from an income product perspective so that TSR performance doesn't include franking, so arguably it understates the return that shareholders have had. If we move to the next slide, please. So that's the dividend update and stating that the bleeding obvious, the intention of this LIC is to pay shareholders a monthly dividend. In that slide, you will see -- shows the dividend history of the company. We started off at $0.045. We went to $0.05 for a considerable period of time. Then COVID hit in March 2020. We lowered the dividend down to $0.04 to make sure that we could continue to pay that stream of fully franked dividends. Once the COVID issues had worked their way through and the economy started to recover, we were able to increase the dividend to $0.045 and then subsequently to -- so when I say $0.04, I beg your pardon, and then to $0.05 and now we're at $0.055. So that shows the monthly dividends since inception. There are 2 dividends we've paid, which are not represented in that graph. In March 2019, we paid a dividend of $0.03 a share because we anticipated with a possible change of government at the time of that election, the franking regime may change and the franking credits we had might have been trapped in the company, so we paid a $0.03 dividend. And then earlier this year, on the fifth anniversary of the company, we paid a $0.55 dividend as a birthday present for shareholders. But that was a one-off. We might do that again at 10 years, but that will be a decision for the Board. If you look at the next slide, that shows the share price as against the NTA. And we've been in a fortunate position unlike many other LICs that we've tended to trade at a very healthy premium to the NTA. And that shows that there is, I think, demand for the product, which PL8 represents, which is a share which provides monthly income and [indiscernible] of the performance of the manager in terms of meeting the objectives of being able to generate income and franking credits to enable us to pay that monthly dividend. As you will see, that graph shows the share price premium over time. We announced an SPP last year and the share price went back to the NTA. And -- but since it recovered reasonably quickly to once again trade at a premium. That's the history of the share price to NTA. We could move to the next slide. We have some news for shareholders, and we announced today on the ASX and before the meeting that we will be undertaking another share purchase plan or SPP. And consistent with the one we did last year, it will enable eligible shareholders, effectively people in Australia and New Zealand, the only ineligible ones are probably in the United States, but we don't have many of those, an opportunity to acquire a minimum of 2,500 shares and up to 30,000 shares. And these are newly paid ordinary shares, and there won't be any brokerage or transaction costs. And from your perspective as shareholders, you want to know what price you'll be paying for these shares and they'll be the lower of one of two things. One is $1.11, which is the pretax NTA of $1.078 as at Friday's close of 18 November 2020, plus the franking credit balance of $0.029 per share and rounded up to the nearest $0.01. So that's the highest price you'll pay. If on the day that the SPP closes, which is going to be Friday, the 9th of December, the pretax NPA is lower than that, you'll pay the pretax NTA on the closing date plus the franking credit balance again on 18 November of $0.029. And this maximum possible issue price of $1.11, that represents an 8.6% discount to closing price on 18 November, which is right of the day before -- business day before we made the announcement today and the 9.4% to the VWAP, the volume weight average price for the 5 trading days up to 18 November 2022. And a question which I'm sure shareholders will ask is, why are we doing this? And the answer is pretty simple. And the Board has via the investment manager and via Pinnacle received very strong shareholder feedback indicating that they would like to be able to make additional investments in the company, but that the current share price premium to NTA is a significant deterrent to that. So an SPP, share purchase plan, at around NTA with a slight raising for the franking balance, I'll come to that in a minute, is the simplest and most cost-effective way to satisfy this additional demand. And in anticipation of a question, we do believe we've done the analysis very carefully that the company's profit reserve and franking credit balance are sufficient to maintain the current level of monthly dividends, including under any additional capital raised under this SPP. And the rationale for including the franking credit balance per share in the price calculation with the issue of new shares under the SPP is to reflect the value to shareholders of the company's current franking credit balance. The NTA calculation does not include any benefit of the franking credit balance. But we do think it's appropriate to include this in the SPP, and it does help to protect those shareholders who elect not to participate in the SPP. So it minimizes their loss of the franking value. The procedures for the SPP, you don't need to take notes now, but you will be receiving a booklet and information as regard from the 23rd of November, that's this Wednesday, either by e-mail or post depending on your preference. And it will explain in detail in [ those ] how to apply. It should be pretty straightforward. You can either apply by BPAY or Electronic Funds Transfer, EFT, and the last date for application, as I mentioned, is 9 December 2022. But you will receive information from Automic, our share registry, on that. And you'll also see in the booklet and what you see there is a help line and an Internet e-mail address if you do have any questions on that. We'd be happy to help you. That is the end of the Chairman's address. Other than, I would like to just mention cybersecurity. It's obviously a very important topic for every board, every company, every organization, I guess, which holds private information. And as a company, we have your shareholder information. We have tax file numbers, we have your addresses and so on. They're actually held with Automic, our share registry. We've met with Automic. It is critical that we do whatever we can to protect your information as best as we can. We're satisfied that Automic has in place some -- the preventative measures which they reasonably can have, and that includes data encryption, independent certification, external expert penetration testing, information security and privacy incident response plans. So we very much hope that your information doesn't get out there. Unfortunately, as you'll appreciate, there are no guarantees. And anybody who says that they can -- they've got a foolproof system against hacking, I would suggest, is overoptimistic. But we very much hope that we don't get any cybersecurity attacks. If we do, that we're able to defend them appropriately. So that is the end of the Chairman's address, as I said, that was listed with the ASX. So I'll now move to the formal business of the meeting. And it's the usual matters to be considered. The 2020 financial statements, the remuneration report and the reelection of directors. If you are attending in person, you should have received a yellow voting card, I see a few around, that entitles you to vote. You're also entitled to ask questions if you received a blue nonvoting card. So you're welcome to ask questions. I'm told that if you have a red visitor card, you are kindly requested only to observe. But from my point of view, if you have a red card and you want to ask a question, you're very welcome to do so. Shareholders voting online must be logged in on Automic's investor portal and detailed instructions of that were included in the Notice of Meeting. And shareholders present, obviously, are free to ask questions and shareholders online are also able to ask questions, you can either type it in the Q&A box in the Zoom screen or alternatively, you can click on a button in the Q&A box to let us know that you'd like to ask a question verbally. This provides your shareholder reference number or holder identification number, and then you will receive a prompt on screen to unmute yourself. When we get to the investment side, the conclusion of that, you're welcome to ask whatever questions you want on the company. If -- when we do the formal business, I'd request that you just keep any questions to the matter under consideration, that particular resolution or matter. As noted in the meeting, our resolutions will be decided by a poll, and I now declare the poll open. There will be 4 resolutions for the meeting. Pretty simple, you either vote for, against or abstain, and all valid proxies received have been recorded, and these will be reported to the ASX after the meeting. I will also display the proxy results we've received so far on the screen. So the first item of business which doesn't require a resolution is a consideration of the financial statements for the year ending 30 June 2022. Those are the annual report, directors' report, the auditors' report and the remuneration report. And so I'd ask if anybody has any questions in relation to the financial statements, the content of the auditors' report from Pitcher Partners with the accounting policies adopted by the company or the independence of the auditor, and we have Mr. Chandran here to answer questions as well on behalf of the auditor. And please feel free to ask any questions you may have. Yes, sir?

[indiscernible]

I might ask Todd, who Pinnacle Partners who does the account.

It's [indiscernible]

Can you just speak up Todd, so that people online can hear you? Yes, you probably can't hear, so.

Sorry. Yes, the June 2022 distribution received from the underlying fund was a very large distribution, that's $20 million compared to the previous year, which was much more.

Just to explain to shareholders. As you know, the way the investment works is, the company has units in the Plato Fund. And as at 30 June, the Plato Fund had not distributed all of the cash because it had a good year. The previous year was probably not a good year. That's why we didn't have that. It's a good question. Thank you. Do we have any other questions on the financials? Okay. Nothing online, Calvin?

[indiscernible]

Okay. Thank you very much. I'll now move to the adoption of the remuneration report. And if you're all experienced attendees of AGMs, you will know what the remuneration report is about. It needs to be approved by the company with less than 25% against. Otherwise, you get a strike. So does anybody have any questions on the remuneration report of the company? Okay. Thank you very much. We might just show the proxies holding our breath. It looks like we've got a reasonable chance of not getting a strike against us. That's good. Okay. The next items on which we need votes or reelection of directors and again, you're probably all familiar with the need for 1/3 of directors to require at every Annual General Meeting. So there are 3 directors who are up for resolution at this general meeting. The first one is the reelection of Katrina Onishi who retiring, put herself up for reelection. Katrina's details are in the Notice of Meeting, but I must ask you, Katrina, just to say a few words to the shareholders.

Yes. Thank you, Jonathan. And I'd say it's been my pleasure and honor to serve as a Director of your company for the last 5.5 years. I joined the PL8 Board just prior to the IPO in April 2017. I had been an investment manager for over 25 years. I'm also a fellow shareholder of PL8 as you are. And as, I guess, a self-funded retiree myself, I understand very much the importance of the monthly dividend that PL8 pays its shareholders. So I'm on the same page with shareholders. And as I wear my director's hat, I'm always very conscious and cognizant of the responsibility that we as directors hold to continue to achieve the company's objectives, which is to pay a fully franked monthly dividend to the greatest extent possible. So if I'm reelected, that's what I will continue to work to do. So I very much thank you for your support and appreciate your support in the future as well. Thank you.

That's a very good speech. That's going to be a very hard act to follow. Does anybody have any questions for Katrina? We might move to see the killer suspense the proxies, so you've got a good chance of being reelected. That looks very good. So thank you, Katrina. The next person up for election is me, so I will hand over the chair to Lorraine.

Okay. Good morning from me as well. So the explanatory statement about Jonathan similarly is -- was in the Notice of Meeting. So I'm going to hand back to Jonathan to say a little about why he would like to be reelected.

I just endorse everything which Katrina said. I'm also a shareholder, and I've been involved in a few listed investment companies. And it is an absolute pleasure and a privilege to be able to serve you, in particular work with our fund manager, Plato, who have delivered on everything which they set out to do. And I trust they'll continue to live with that. And if I am reelected, I look forward to continuing to be able to serve you. So thank you.

Thanks, Jonathan. I'll just add that I'm also a shareholder, and I love those monthly dividends. Okay, the resolution is up on the screen, and we have a quick look at the number of proxies. Whilst Katrina beat you Jonathan, but it's not a competition. Okay, if everybody could please cast their vote -- oh sorry, any questions? Okay. Cast your vote, and I'll hand the chair back to Jonathan.

Thank you, Lorraine. The next resolution is for the reelection of Chris Meyer as -- [ Shaw ], if you could just move that thing forward. Thank you very much. As Director, Chris joined us earlier this year, replacing Alex Ihlenfeldt who was one of the founding directors, and I would like to acknowledge Alex's contribution. He's a wonderful champ to work with, and we very much appreciate the effort that he put into Plato while he was on the Board. We're very excited to have Chris join the Board. And I might hand over to Chris to say a few words.

Thanks, Jonathan, and morning, everyone. Like my fellow directors, I'm also a shareholder of PL8. But unlike my fellow directors, I'm not a self-funded retiree yet. I'm still working for a living. I work for Pinnacle. Pinnacle is a 42 and a bit, I think, [ Don ] shareholder in Plato, the asset manager, and we provide most of the non-investment services, not just to PL8, the LIC, but also to Plato the asset manager. And so that's everything from finance, legal, marketing, distribution, Investor Relations. So many of you may see me at certain conferences regarding PL8. I run the listed funds business. We're very committed to listed funds as Pinnacle. We have 10 of them. So the success of the listed funds business is very important to us as an organization and the success of PL8 is also very important to us. I've been involved in stock markets and fund management, most of my professional career. I'm also on the Board of the Listed Investment Company Association. So if you elect me as one of your directors, I look forward to serving you and bringing that experience to the success -- ongoing success of PL8. Thank you.

Thank you very much, Chris. And do anybody got any questions for Chris or me on Chris's reelection? If we could just have a look at the proxies, we could see the proxy, please, if the technology works. And Chris, I see well done, you beat me as well. So I'm running third in this race. I don't know what I've done wrong, but that's okay. So that brings us to the end of these resolutions. If you could please vote for each of the 4 resolutions. If you're online, please select confirm to complete your voting once you cast the vote. And if you're attending in person, please lodge your completed voting cards in a ballot box and there's an Automic guy around here to collect those voting cards. Just hand them in, and I will declare the poll closed in a few minutes. But you want to all hand in your voting cards, thank you very much. And hold them up. Put them in. Thank you. As I have announced, I'm voting all open proxies in favor of the resolutions too. [Voting]

Thank you very much. I declare the poll closed and the results of the poll will be announced to the ASX as soon as they are available. That concludes the formal business of the meeting. And so I'll now hand over to the part, which I think we're all interested in, which is the investment manager update. So over to Don supported by Peter. Thank you.

Thank you, Jonathan, and I hope everyone can hear me. I am sorry, I apologize for not being there in-person today. I would have -- I was looking forward to attending the meeting today, but I woke up with a very sore throat and I didn't want today to be a super spreader event. I think we all now know if you're sick, you should stay at home and don't spread things around. So apologies for not being there in-person. Well, certainly, things have changed a lot since the last AGM in terms of markets and outlook. But I think the one thing that has stayed the same, and if we move to the next slide, is that PL8 continues to pay a higher yield than the market and that is obviously the objective of it. And it's been strong over the last 12 months, as the year ending September compared to a market of 6%, PL8's delivered about 8% gross yield. And it also continues to outperform the market in total return terms. The next slide shows you the longer-term performance. So this is not of PL8 itself, but it's the underlying fund which PL8 invests into, which is the Plato Australian Shares Income Fund, which is now over 11 years old. And the blue lines represent -- the top ones represent the total return, including franking credits accumulated for the Plato Australian Shares Income Fund and the gray line is for the market, including franking. And at the bottom, we have actually the cumulative distributions in blue again for the fund and in gray for the market. And you can see in both cases, the fund has delivered more total return and more income and primarily as a form of income than the market. And so we continue to sort of meet our objectives, which is to outperform in these our after fees. But moving to sort of markets. So we've delivered on what we said we'd do, but markets have certainly changed a lot in the last 12 months. And if we look at the next slide, there's a huge amount of uncertainty in the world. If you read the media, you would actually think it's probably the worst of times. We've got inflation at a 30-year highs at currently at 7.3%. We've seen rapidly rising interest rates, albeit from an incredibly low level. We've seen 2.75% cumulative rise in cash rates here in Australia in about 6 months, and the market is probably looking for another 1% or so more in the next year. We obviously have a war going on in Ukraine with Russia invading Ukraine. We still have supply chain issues from COVID, well these are starting to improve. And most of us are homeowners and house prices are falling. So it's been a long time since they've fallen and then they're falling pretty fast. And this year, we've seen both bond and equity markets selling off together. So there's really been no safe place to hide except maybe cash, but we'll talk about that in a minute. And we saw it in bonds and equities was actually the worst since 1994. Having said that, we've seen a pretty strong rebound in markets in the last couple of months. And the Australian market is now year-on-year actually flat, particularly when you include franking credits it's pretty flat or even up. So it did look a bit doom and gloom certainly in midyear, but people are looking through some of the current problems. But nevertheless, financial year '22, so the financial year ending June 30, 2022 was the third worst financial year on record according to Investor Daily. So there are a lot of problems out there and the papers are full of doom and gloom. But I think I'm as much look for the positives as well as the negatives. And I think there's still very many positives out there. If we look at the next slide, whilst there still is a lot of uncertainty, there's -- things actually aren't all that bad. Here in Australia, our economy is essentially at full employment. I mean there are -- in every cafe you go to, every shop, there's sort of signs in the window looking for workers. And if everybody's got a job, they continue to pay their mortgage, but they might struggle a little bit with interest rates rising, but you normally -- if you've got a job, you pay mortgage. It is the case that cash rates have risen a lot. But if you actually look at a long-term trend, there's still a very normal level. I think the abnormal bit was the fact that interest rates were at 0.1%, basically 0 for a couple of years. That was the abnormal bit. We're actually returning more to a normal level of interest rates, I think. The other thing, if we look at -- we invest in Australian shares, and that is the pool of investments that we look at for PL8. Corporate balance sheets are very strong. Debt levels by and large are very low. I mean we've got an example of the biggest company in Australia on that later in this presentation. And not that we're still on that one, but I mean there are a lot of companies in Australia that will actually benefit from the current stresses in Ukraine. Australia is a very large exporter of LNG and a very large exporter of grain. And Russia is holding back gas from Europe. Australian companies such as Woodside and Origin and Santos are benefiting from higher LNG prices. Our coal companies are benefiting from higher coal prices. And we grow a lot of grain. So companies associated with that are doing -- making quite good handsome profits at the moment from those. And whilst our house prices are still falling, they're still well above pre-COVID levels because we had a massive increase in house prices sort of throughout COVID, not initially, but once people thought it wasn't too bad, then house prices rose dramatically. So if you've been in your house for a few years, you're probably still winning the money. And many borrowers are well ahead of repayments. We have massive amounts in offset accounts. So there is stress in some people, but for the average homeowner, I think it's still looking pretty good. And actually whilst we might have had the third worst financial year for super funds, that followed the second best financial year of super funds. So you average out '21 and '22 and you've got a pretty normal environment. So to me, there's a lot of positives around even though there are negatives. And the reality is the share market has bounced quite handsomely more recently. So I think the worst may be behind us. But let's look at interest rates and what's happening on the next slide. So last year, and we've been saying this for a couple of years, the RBA was telling us that interest rates would remain low at 0.1% for 3 years, right, after sort of 2023, maybe even '24. But that was -- and they were still saying this somewhat remarkably, even in February of this year. But if we look forward what's happened in this calendar year, things have changed dramatically. So that expectation of cash rates remaining at basically 0 for 3 years has been completely changed. And we now see that what has actually happened is that interest rates have risen on the next slide from 0.1% to 2.85%. And as I said, the market is sort of expecting about another 1% of interest rate rises -- additional interest rate rise over the next sort of 6 to 12 months. So -- but in terms of that longer-term picture, the current interest rates aren't excessively high. I think that's something -- especially when inflation is running very high. And I think that is one of the challenges on the next slide actually is -- despite the fact that interest rates are rising, the bond yields are rising and the cash rates rising, in terms deposits are, for the first time in basically 10 years or 11 years rising, inflation is rising even faster. And sorry, that inflation rate at the end of September 6%, in June at 7.3% for the 12 months ending September. So inflation is eroding away the earnings that you can get on term deposits and bond yields so that actually, investors who are sitting in these, what we call safe assets, are losing money even more than they did 1 year or 2 back when interest rates were much lower because inflation has suddenly rebounded, and we're all aware of that. So I think the issue is safe assets are now losing you a lot of money. And so I think investors are still struggling to make ends meet and hopefully PL8 can fill that void with the strong dividend yield that it pays on a regular monthly basis. So moving on. Just to sum up the last, and this is probably pretty old news, we did webinar on it a few months ago. But if we look at the August reporting season, so this is actually for this year rather than last year, but it was a cracker of a season really, we saw $44 billion in dividends declared in the month of August. Remember most of those are fully franked. So actually you've added the franking in there, you're probably getting closer to $55 million, $60 million -- $1 billion, sorry, from companies. And there were some huge results. I mentioned, resource stocks, particularly the coal stocks and the likes of Woodside and Origin had massive increases in dividends, albeit from fairly low levels last year. But given the higher prices for energy, we continue to see stocks like Whitehaven Coal and Woodside are likely to pay very strong dividends this year as well. And you're still seeing stocks like JB Hi-Fi doing quite well even though people are talking about slowing consumers' discretionary sales. We haven't really seen a lot of evidence of that yet. And there's also companies like Computershare, which a couple of weeks ago, had a massive upgrade to its forecast profits. They actually benefit from higher interest rates. So there are some companies that actually benefit from higher interest rates, and we're looking for those, seeking those out. The other ones that benefit from higher interest rates are banks. And we're actually quite bullish on banks because rising interest rates, banks tend to rapidly increase their mortgage rates whenever the RBA raises rates. The banks immediately pass those increases on to their customers. But they're much slower at raising the deposit rates. And so if you go back through history, when interest rates rise, bank's net interest margin, which is really their profit margin,between what they pay on their -- receive on their loans and what they pay from their deposit to their depositors, that actually goes up. And we've seen in the recent -- most recent banking results increases in the net interest margins across all the banks as they are benefiting from a rising interest rate cycle. And we haven't seen a rising interest rate cycle, say, for about 11 years or 12 years. And I think some people have forgotten how much banks actually benefit in those things. So we're actually pretty bullish. And if you look at the -- there are some big increases in dividends. On a market cap-weighted basis, dividends increased 20% in August. It is the case, and this is both an opportunity, but also a slide here, I think, that people need to think about. The Australian market is very concentrated. The top 7 stocks represent about 2/3 of the income. Four of them are banks, but we're fairly bullish on banks. Three of them are iron ore miners, although BHP and Rio also have copper and other assets. And you're probably aware that BHP has made a bid for Aus minerals to increase its exposure to copper going forward. So just wonder where -- but I just want to focus on one result, and it is actually the BHP's results. It's the biggest company in Australia. It had a near-record profit result in August of $22.4 billion, was just a tiny bit shy of its best year about -- which was about 2011. Their result was extremely strong despite the fact that iron ore prices have come off. And it shows the benefit of being a diversified miner. BHP has a coal division, and that coal division increased its EBITDA from less than USD 300 million in '21 to nearly $10 billion, $9.5 billion in the financial year we've just finished. That is a huge turnaround, right, 30x more. And that more than made up for the whole or the reduction in iron ore earnings. It was a record annual dividend for BHP, USD 3.25 fully franked. And remember that BHP actually sold or spun off its assets, oil and gas assets to Woodside in June of this year. And I think my telling point, I mentioned before about low debt levels. That's why BHP can easily fund the Aus Minerals, the purchase. BHP basically had no debt at the end of the year, had just USD 300 million of debt which is only a couple of days cash flow. So I think it is the biggest company in Australia. I think it highlights how strong the Australian corporate land is. So moving on, it's always about expectations, though. And a couple of things to worry about. There's always going to be the odd company where we think things are quite troubled. Part of our process is avoiding these stocks that make up the dividends and the one that we've been -- which we expected to cut its dividend and it did cut its dividend in August, but we think it will continue to cut its dividend is Magellan Financial. We all know the problems at Magellan. But we just want to highlight that if you have a simple process that you just sort of buy that stock through the highest yield, you'll probably be buying Magellan. Because if you look back over the last 12 months, it did pay some dividends but we expect those dividends to fall dramatically as the share price has fallen because it's lost a lot of it's fund. It's an important part of our process to be looking ahead and looking at not the last dividend the company has paid but looking for the next dividend and try to avoid these dividend traps. Now we can also -- if we move to the next slide, which some other, I suppose, a little bad news that came out of the budget. It wasn't a big headline, but -- and it's not going to be a big deal for us. But we've always looked out for opportunities to get franking credits. And in the past, one of those opportunities, but it's only one is to look for companies that pay -- do buybacks, off-market buybacks. McMillan Shakespeare completed one and we participated in it only a few weeks ago, actually just prior to the budget. And it was worth about 20%, and it released a lot of franking credits, which is the sort of the grayish, the $4.57 number there, did release those franking credits. It was a pretty small buyback and when it was dialed back heavily, so it didn't add a lot of money to the clients. But the federal government has announced, the ALP government has announced that they will no longer have this special treatment for off-market buybacks, they will be treated as just a normal buyback and they won't be able to [ out ] stream the franking to investors. So it looks like we will no longer be participating in those. It's not a big deal. We've gone back through the history of the buyback fund, so over 11 years. It's only reflected around 30 basis points of contributions from those buybacks. So it's not a big impact. We don't think -- and the other thing is if companies can no longer do those buybacks, they need to be a little bit more progressive in the way that they pay their franking credits out, whether it be via normal dividends or special dividends. So we actually think that whilst -- so given that this opportunity has finished, then there'll probably be more normal or special dividends. It's probably not a bad time for the government to have done the timing of this because we've actually had a record last 12 months. We do have some participated in a number of buybacks. And a lot of companies have flushed out those franking credits such as BHP which then with the spin-off of Woodside or the banks such as in Westpac and CommBank, which did have excess franking account balances, they've just completed buybacks. So a lot of the excess franking has actually been flushed out. So it's probably not a bad time looking forward for this to actually happen. But the main game for us is still looking for normal dividends and special dividends that are fully franked, and there are still -- we expect probably slightly more of those given this announcement. But -- just moving on to the next slide. This has been one of my favorite slides to talk about for the last few years. And this actually uses our statistical model. So we do actually forecast for every stock that pays a dividend in Australia. We forecast the likelihood that it will cut us next dividend. So it's a bit of a litmus thermometer, a litmus test of the outlook for dividends. And it's quite clear, and this has averaged up across all the stocks in the market that pay dividends. So it's a market-wide sort of indicator of how good a dividend is to the dividend outlook. A high number is bad if in the GFC and in the height of the pandemic in sort of March, April 2020, we saw those were the peaks of high cuts -- of high probabilities of dividend cuts across the market. The pandemic was actually worse than the GFC from that respect. GFC peak was around 40%. Pandemic got above 45%. So -- but it did rapidly fall after as we all realized that the COVID wasn't the end of the world and the dividends would come back and those would do okay and pay dividends, et cetera, you saw that fall to below average levels last year, which is why we're being very bullish about the dividend outlook. You can just see that in the course of this year, that probability has just ticked above the long-term average, but it's still nowhere near sort of high levels. So we think the outlook for dividends is still pretty good, not as good as it was a year ago, but it is still good, and we're quite bullish on sectors like the banks and the energy stocks. So we still think there'll be plenty of good dividends in the Australian market over the next 12 months. That's pretty much everything I wanted to say. I think we have a -- just the conclusion is, for many people, let's say, interest rates -- rising interest rates is bad news because it does challenge asset prices. I mean, to me, that totally explains why house prices falling is because when you go to the bank to get a mortgage to buy a new house, you can't acquire as much as you used to be able to. So you can't bid as much. The problem is that interest rates are, in fact, aren't rising fast enough to offset inflation. As I said, if you're sitting in term deposits, you're actually going backwards. And we have got that little bad news about the tax written buybacks, but it's not a big deal from our point of view. I mean in many years in the past, there have been the buybacks anyway. So we've always used -- seen them as opportunistic. But the good news is that dividends have rebounded strongly over the last 12 years. Dividend levels are high. That dividend cut model is only just above average. So it's not total doom and gloom. We think there's still some great sectors such as energy and banks to do dividends. So we think that there's still good news in the Australian marketplace. PL8 has quite a kitty of franking credits and retained earnings to pay dividends. And I think Jonathan has talked about the opportunities today. Today, we announced an SPP for PL8. And I think that's a chance for investors to buy at lower prices into PL8 and get more of those fully franked monthly dividends. So that's all I want to say. I'm happy to take questions. I can't actually hear people asking questions unless there's a microphone there. So if you can't use the microphone, maybe you might want to ask your question or Jonathan can reask the question so I can hear it. And Peter will be in the room too, and he may want to answer some of these questions.

Thank you very much, Don. I think we do have a roving mic that we may be able to use to ask you any questions. So I'll just throw it open to shareholders, both here and online for any questions you may have for Don or for me or anything. Yes, sir?

Can we get a copy of that?

Of the presentation?

Yes.

I think it's been released to the ASX. Is that correct? Yes, it's on the ASX website. I'm not sure if we have a hard copy here. Yes, it's -- it will be -- it was released this morning on the ASX website. Any other questions? Or does the presentation answer every possible question anybody may have?

[indiscernible] the franking credits in the future. Are we going to attack any of the banking credits in the future?

I'll ask Don to pull out his crystal ball, and Don, I don't know if you heard the question, but what's your view on what labor is going to do with franking credits?

Yes. Well, Anthony Albanese was pretty clear January last year. He said that, that refunding policy or non refunding of franking credits would remain. I've seen some speeches by the Deputy Treasurer just in the last couple of days, and he was very clear saying the franking system is here to stay. Then they -- I believe that consider the tax effective buybacks is a bit of an anomaly that where you can essentially stream franking credits to certain shareholders who most value franking credits. Whereas if you think about normal ordinary dividends or even special dividends, everybody gets the same amount of dividends and the same amount of franking credits, whether you can use it or not. If you're a foreigner, you can't use them but you still get them. So all shareholders are treated equally normally in things like dividends. So from what I've seen, the ALP will continue the current system. There has been quite a bit of talk about potentially looking at how much people can have in superannuation, that's certainly been something that's been discussed a lot. So that may happen. There may be some total limit on how much people can put in superannuation. At the moment, there's a $1.7 million limit on how much you can have in tax-free super when you retire. But there is no limit on the amount of superannuation that you can have. And there are a couple of very large funds with super funds or self-managed super funds with more than $100 million. So that may be another area that I think the current government might look at, but they've been pretty clear saying that franking remains.

Any other questions shareholders may have? Okay. Yes, sir.

Just on that question, do you have a view about the retrospectivity of this franking legislation?

The buybacks, I believe, it's from the announcement date, which is a mini budget. So there'll be no retrospectivity. It's just the companies won't be able to do it in the future. So the McMillan Shakespeare one that we participate in will still be fine. There was -- and you may have also heard, there was another thing that the new government has brought back to life, which was there was a case that Harvey Norman did a few years ago where they raised equity at the same time that they paid a special dividend. And essentially, they used the money that they received from the equity raise to pay the special dividend. The ALP has resurrected that potential legislation and look likely to ban companies from raising capital and paying dividends at the same time. They initially proposed that to be retrospective, but have actually agreed -- I've seen them admit that they won't be pursuing that retrospectivity, which I think is very positive. We put a submission in that and I think making things retrospective before you've announced them is not good policy.

Yes. And if I could just add that from PL8's perspective, obviously, we don't pay dividends out of capital we raised. We raise the money in the SPP, but dividends come out of our profit reserve, but that wouldn't affect us even if it gets passed. Any other questions or otherwise, I will declare the meeting closed. Yes, sir?

I just have a few technical questions. I'm wondering whether Secretary or somebody from Pinnacle I can discuss a few things, but it wasn't relating to Don's.

Please feel free to ask whatever you want, right? Do you want to ask after the meeting?

Yes, I think better if I ask after the meeting.

Well, we've got the Company Secretary here. We've got the auditors. We've got the accountant. And so hopefully, they'll be able to answer your questions. Very good. Well, thank you very much, everybody, for attending. Wishing you all a good holiday season. We look forward to seeing you next year, and thank you very much for coming. I declare the meeting closed. Thank you.