Regal Partners Limited (RPL) Earnings Call Transcript & Summary

All right. It's now 10:00. So that's the appointed point of time, so we'll kick off. Good morning, everyone. My name is Michael Cole, I'm the Independent Chairman of Regal Partners Limited. Thank you for joining us today for the company's 2023 Annual General Meeting. Before I go any further, could I ask all people in the room to turn your mobile phones to silent? Thank you. The company secretary has advised me that we have a quorum, so I declare the meeting open. The notice of the meeting has been sent to shareholders on the 21st of April and will be taken as read. I begin today by acknowledging the traditional custodians of the land on which we meet, the Gadigal people of the Eora Nation and pay my respects to elders past, present and emerging. I'm chairing today's meeting from Customs House in Sydney. And the company's directors are all in attendance. Onstage with me today are members of the Board: Brendan O'Connor, who's CEO and Managing Director; and Sarah Dulhunty, Jaye Gardner, both Independent Non-Executive Directors; Ian Gibson, an Executive Director. And on the far side of the stage, we have Ian Cameron, our Chief Financial Officer and Joint Company Secretary. Also, in attendance are representatives of our shareholding registry, boardroom and our auditor, Deloitte, who is represented by Jon Corbett. We are pleased to be conducting today's meeting in a hybrid format, meaning that people can participate in person, online or over the phone. This will provide plenty of opportunities for shareholders to ask questions during the meeting. Please refer to the meeting materials distributed to shareholders for detailed instructions on how to participate. And I'll run through the key points shortly. Turning to our agenda today. As reflected in the agenda, I will begin with a short introductory address. Brendan O'Connor will then provide a brief update on the group. And we will then move to the formal resolutions, where I will take questions on each resolution. Following this, there will be an opportunity for you to ask general questions. And we will then collect all the votes. Once we formally conclude the AGM, we will then host live refreshments at the back of the room for shareholders attending in person. Please note, today's meeting is about Regal Partners. And we will focus primarily on key items in the notice of the meeting. Questions about equity markets, individual portfolios and funds are best-kept for other forums such as webinars and client events that we host throughout the year. Questions about your personal holdings may be directed to our Investor Relations teams or the share registry after this meeting, both of whom will be happy to help. In addition, the ASX-listed investment vehicles to which we provide investment management services have their own independent governance structures. In the case of RF1, that is Responsible Entity Equity Trustees. In the case of the ASX-listed investment companies being Regal Asian Investments, or RG8, and VGI Partners Global Investments Limited, VG1, those companies have their own boards. They are not subsidiaries of Regal Partners Limited. And so I and other directors are not responsible for their decision-making in the way that we are ultimately responsible for the decisions of Regal Partners Limited and its subsidiaries. Decisions of those companies beyond the responsibility for day-to-day investment of their portfolios are specifically delegated to us under the investment management agreements and are matters for the Boards of those companies. Now turning to the logistics of the meeting, I would like to hand over to Rebecca Fesq, who will run through the process of asking questions and voting. Rebecca, she is Head of Client Business and Strategic Partnerships at Regal. Thank you, Rebecca.

For today's meeting, all resolutions are being voted on by poll. For those in the room, when you have registered today, you would have received one of three colored cards. Green cards were given to shareholders who have not submitted proxy forms prior to this meeting and proxy holders. Green cardholders can therefore vote on the resolutions being put forward. Holders of the green cards are also entitled to ask questions when prompted throughout the course of the meeting. Yellow cards were given to shareholders who have submitted proxy forms prior to this meeting and who, therefore, cannot cast votes again during the meeting. However, you are welcome to ask questions when we reach the relevant parts of the meeting. White cards were given to non-shareholder guests, who cannot vote or ask questions during the meeting. You can complete your voting at any time during the meeting, just make sure that you give your card to one of our boardroom representatives before we close voting at the end of the meeting. In terms of asking questions in the room, when we reach the relevant item in the meeting, we will ask people with questions who have a green or yellow card to make their way to a microphone and show their card before asking their questions. Depending on time and the number of questions, we may need to limit each shareholder to two questions or comments per item of business. For those of you who have logged into the webcast with your username and password, you will have the opportunity to submit questions online as well as vote on the resolutions. If you have already prepared a question, please submit it now through the website, and we will aim to answer it at the appropriate stage of the meeting. If your question relates to a specific item of business, please state the resolution number or reference the financial report at the start of the question. All other questions will be considered during the section for general questions. If we receive multiple questions on the same topic, we may group those together. Again, depending on time and the number of questions, we may also need to limit each shareholder to two questions or comments per item of business. With regard to online voting, to give you ample time to vote, we are going to open the polls now. This means you can submit your online votes at any time between now and when we close the polls at the end of the meeting. If you change your mind about any vote, you can also override your original online vote between now and when the polls close. For those of you who have logged into the website as a guest, you will be able to view our webcast but not submit questions or vote. For shareholders who have joined over the phone, if you have provided your passcode to the call center and been verified, you will be able to ask questions. Please note that the process for registering your questions is very different to the webcast. For those on the phones, please do not try to register for any questions or comments yet as we will only open the phone lines when we reach each item of business. So when we arrive at the first item, we will ask if you want to register for a question on that topic. [Operator Instructions] Once we have finished that item of business, we will move to the next item of business and repeat this process. Please do not register to ask a question for an item of business before we reach that item. So that we can give all shareholders a reasonable opportunity to ask their questions, once we have answered a shareholder's question, we will move to the next person in the phone queue. [Operator Instructions] I should also point out that if you are listening on the phone but viewing the webcast as well, the webcast may lag the phone by 10 seconds or more. It may be simpler just to use the webcast for the sound as well. Note that you will not be able to vote over the phone. With these procedural matters handled, I would now like to hand back to Michael Cole to make his Chairman's address.

Thanks, Rebecca. On behalf of the Board of Regal Partners, or RPL, I would like to warmly welcome all shareholders today and very much thank them for your support. Today's meeting is a notable milestone for us, given it is the inaugural AGM of the company following the merger of Regal Funds Management and VGI Partners last June. The union of these two companies to form Regal Partners has created a market-leading provider of alternative investment strategies with a strong track record across a broad range of alternative asset classes and an ambition to be a leading provider of these products across Australia and Asia. Before we speak about the business, I would like to take a moment to provide additional background on our Board members, given this is our first AGM post merger. As many of you would know, at the time of the merger, it was agreed to have a Board of six directors, two nominated by Regal Funds Management, two nominated by the VGI partners and two independents. David Jones, a VGI nominee, recently announced his intention not to seek reelection today and has subsequently stepped down from the Board formally as of this morning. As a result, our Board consists of five directors, three of whom are independent. This means we are now a majority independent, in addition to having an Independent Chairman. We believe this is a key part of meeting our governance goals and expect it to resonate soundly with our shareholder base. As to our current membership, from the original Regal business, we have Brendan O'Connor and Ian Gibson. Brendan has been the Regal Funds CEO since 2016 and Managing Director of Regal Partners from June 2022. And Ian is a co-founder of Attunga Capital, which was majority owned by Regal Funds Management prior to the merger and now by Regal Partners. On the VGI side, we have Jaye Gardner, who previously sat on the VGI Board as an Independent Director. Jaye remains an Independent Director of Regal Partners and is also a Managing Director at Grant Samuel, where she specializes in corporate valuations and mergers and acquisitions advice. And finally, Sarah Dulhunty and I were the two new independents appointed to the group. Sarah is a former partner of the law firm, Ashurst, specializing in equity capital markets, mergers and acquisitions and corporate governance and was also a member of the Australian Takeover Panel for 9 years. I think I can speak on behalf of the whole Board when I say I have found Sarah's insights and contributions of significant value, particularly as the business continues to explore new growth opportunities, both organically and inorganically. In terms of my background, although I was new to the Regal Partners group last year, I have worked in Australian financial services for over 40 years and have keenly observed the development of both Regal Funds and VGI since their respective inceptions. I was honored to be approached for the role of RPL Chair and look forward to serving shareholders well. My past roles include a number of Board positions, including a former Chair of the ASX-listed investment management company, Platinum Asset Management. I would now like to address a few formalities. With David leaving the Board earlier today, I'd firstly like to thank David for his many years of contribution to both VGI and Regal Partners. We obviously wish David well for the future and look forward to continuing to speak with him in his role as a director of VG1 and RG8, the two independent ASX-listed investment companies at this time. However, we will continue to evaluate this as the company evolves and grows. I should also add that David was not a member of Regal's Audit or Remuneration Committees. And as such, there is no need to replace in there. Earlier this month, I joined Regal's Audit and Risk Committee, taking the number of members to four. At today's meeting, Ian Gibson is seeking reelection and other members of the Board firmly support this. And we shall discuss this further when we reach the relevant resolutions. Turning now to the business. Nearly a year has passed since the merger completed and the group has achieved a tremendous amount over that period. Regal's CEO and Managing Director, Brendan O'Connor, will elaborate on this further in the CEO speech, but I will touch on a few highlights here. Also, I should just remind everyone that Regal Partners has a December year-end. But given that the merger was completed last June, most of our historical commentary will be then focused on the 6 months to December 2022 and developments since then. Firstly, funds under management, or FUM, has risen 17% to over $5.5 billion over the 10 months to the 30th of April 2023. And this was primarily driven by over $900 million of net inflows, an impressive effort in an industry where many traditional asset managers are currently experiencing consistent fund outflows. Importantly, Regal's fund inflows have been well established across a mix of existing strategies and new funds, such as Regal's Private Credit Opportunities Fund, which successfully launched in October last year. Secondly, the company's entitlement offer in September 2022 raised approximately $110 million of gross proceeds to assist with the ongoing growth initiatives and co-investment opportunities. This raising further boosted Regal's balance sheet and provides the company with additional flexibility to consider both organic and inorganic growth opportunities. A recent agreement for Regal to acquire alternative asset manager, East Point Asset Management in Hong Kong, provides an example of this. We've also been pleased to welcome a number of new shareholders onto the register both through our capital raising in September as well as our general on-market buying. This has included some significant high-net-worth individuals and families as well as a number of quality institutional investors. Another benefit of the raising was that it increased our free float, which supports on-market liquidity and is hopefully a stepping stone to index inclusion at some point in the future. Lastly, in terms of financials, pro forma normalized net profit after tax for the 6 months to December 2022 was $18.2 million. And a $0.04 fully franked final dividend was declared in February this year. For those VGI shareholders who invested -- who were invested prior to the merger, there was also a $0.397 fully franked special dividend paid last June, taking total dividends for Regal's 2022 financial year to $0.437. The company also launched a Dividend Reinvestment Plan in February this year. And I would encourage shareholders to contact RPL's Investor Relations team or the share registry if you require more information. In terms of the outlook from here, I'll leave it to Brendan to provide more detail. However, I would like to reiterate, as I said, Regal is very well placed for the future, given its strong track record, current fundraising momentum and broadening range of alternative asset strategies available. To put this in context, earlier in my career, the biggest local success stories were in the traditional long-only domestic equities. We then saw the rise of some specialist players offering global-only equities. However, with the evolution of both markets and technology as well as the more challenging economic conditions related to rising interest rates and persistent inflation, we're now seeing growing demand for alternative asset classes. This is where Regal we see being exceptionally well positioned to offer a broad suite of investment strategies to clients across long/short equities, private markets, real and natural assets and our capital solutions platform. Over time, Regal may seek to further expand those capabilities. However, this will only be done carefully and when we feel the opportunities make sense for our shareholders. This concludes my remarks. And I'd now like to hand over to Brendan for the CEO's report.

Thank you, Michael. As you've just heard, Regal Partners group has had a transformative year since the merger completed. And I'd like to thank you, our shareholders and our clients, who have shown their support during this time. In my presentation today, I'll provide a brief overview of the last 12 months, in addition to a progress update on our strategic ambition of being the leading provider of alternative investment strategies in Australia and Asia. Firstly, however, I think it's really important to set the scene with how we manage the business and the behaviors that we expect from our employees across the group and to which we hold each other accountable. When we demonstrate these behaviors, it fosters a positive culture that lays a strong platform for our strategic success and longer-term ambitions to be realized. Starting from the top of this slide. Client first is core to our business. Delighted clients are our best advocates and it's the bedrock of the asset management industry. We are custodians of client capital. And we can never lose sight that managing money for our clients is a great privilege and one that should be never taken for granted. Three, accountability and reputation are everything. We like to say that the standard you walk past is the standard that you accept. Four, be entrepreneurial, be passionate and embrace the opportunities that change presents. We are fortunate to deal with many clients and family groups who have successfully built businesses from scratch because they have embraced these same qualities. And they rightfully expect the same from us. Five, collaborate. We win as the team and embrace collaboration and diversity of thought. We have a saying, "Whoever is closest to the ball kicks it." And finally, be the benchmark in alignment. By investing alongside our clients, we ensure that our interest always remain highly aligned. And this properly establishes the core pillar of trust between investor and manager. This is the truest sense of partnership and a foundation of both the Regal and VGI businesses since their respective inceptions. Before I move on, I'd say it's been a great delight to sit down here and be CEO of a wonderful business. It's a wonderful team. And it's a great privilege to be able to lead this team. And a lot of the achievements that we highlight in today's presentation are very much as a result of the great team that we have at Regal Partners. But the past 12 months have certainly been an exciting period for the group. In June 2022, we were very pleased to complete the merger between Regal Funds and VGI Partners. As many of you would be aware, Regal Funds Management was previously a privately owned asset management business that had enjoyed strong growth across a number of its alternative investment strategies and was seeking opportunities to expand its scalable investment, operating and distribution platforms. A number of initiatives were well progressed in this regard prior to the VGI merger, given Regal had been expanding its investment team and capabilities to launch a number of new alternative strategies in recent years, in addition to acquiring majority stakes in Kilter Rural and Attunga Capital. The merger of VGI Partners and Regal Funds provide an attractive opportunity for Regal to provide -- to further accelerate its growth and to add further capabilities, including dedicated global and Asian strategies, as well as simultaneously enabling Regal to become a public company via VGI's ASX listing. For VGI, there were benefits of becoming part of a more diversified asset management group and in particular, the opportunity to leverage the scale and expertise of Regal's institutional-grade operating platform and highly regarded client services and marketing team. The slide here shows a brief snapshot of our business today, highlighting $5.5 billion of FUM, a market capitalization of just under $800 million. We have 4 offices globally in Sydney, Victoria, Singapore and New York and approximately 100 employees with nearly half of that, 45, being investment professionals. Our FUM of $5.5 billion is split across 4 key asset classes: long/short equities, private markets, real and natural assets and capital solutions. Today, long/short equities make up about 2/3 of the business. However, we see great potential for other areas to continue to grow their share, particularly in: real and natural assets, covering water, farmlands, power and carbon strategies; and capital solutions, including resource royalties and Regal's recently launched private credit strategy. Our client base remains heavily skewed to higher-value wholesale net worth and ultra-high net worth families and their advisers and family offices, complemented by three ASX-listed funds that provide a convenient entry point for both retail investors to access a selection of Regal's strategies. The group has been well supported by institutional investors of late, both domestically and offshore. And we will continue to build this channel where available capacity allows. This slide provides some of the highlights of additional details -- or this slide provides some additional detail on our achievements following the merger. We've touched upon some of these already. But just to further highlight, we noted that Regal won the Global Equities and Market Neutral categories of the Hedge Fund -- HFM Asia Performance Awards as well as the Market Neutral category at the AIMA Australia Awards. The support received from new and existing shareholders in RF1, Regal's listed investment trust, which raised $92 million in June 2022 via a wholesale placement and unit purchase plan. I'd also highlight the receipt of a number of new institutional investments across long/short equities, Kilter Rural's Water strategy and Attunga Capital's Power & Enviro strategy. The successful launch of Regal's Private Credit Opportunities Fund last year following the hire of two highly regarded and experienced private credit specialists. Pleasingly, the fund has had a great traction, securing a $200 million commitment from a prominent external Australian family office with the option to invest a further $100 million. And finally, the operational and investment integration of Regal and VGI teams has continued to progress well with VGI migrating across to Regal's proprietary IT and trading systems, enabling management to access a firm-wide view of portfolio attribution and risk management metrics. And additionally, portfolio management of VGI's Asian strategy, RG8, was transitioned to Regal Funds Management and its Chief Investment Officer, Phil King, leveraging Regal's track record in managing long/short equity strategies across the Asian region and large fundamental research team located in offices in Sydney and Singapore. In fact, the benefits of the merger are already becoming apparent with the shareholder returns of the ASX-listed vehicles, VG1 and RG8, outperforming the Australian market over the past 12 months with VG1 and RG8 both delivering returns to shareholders of 18% despite the tumultuous equity market. This is a result of a combination of both good investment returns, and I should highlight and pay tribute to the global team, led by Rob Luciano, Marco Anselmi and Simon Birrell; and the Asian team, led by Phil King, Shannon McConaghy and Glen Barnes, as well as our marketing and distribution team helping to reduce the discount to NTA. On fund inflows, as Michael stated, we have continued to see strong support from new and existing investors, which has translated to strong net inflows across the group this year. You may recall that prior to Regal's merger with VGI, Regal generated over $700 million in net inflows for the year to June 2022. And our merged group has over $900 million of net inflows for the 10 months to April 2023. Pleasingly, this means that we are fast approaching or closing in on our current target of $1 billion of net inflows for the year to June 2023, a very strong outcome when compared to the broader industry trends. While our domestic investor base continues to represent the substantial majority of our current inflows across the group, we have been pleased with the strong level of traction and inbound client enquiry from our offshore investor relationships, including large international fund-of-fund investors, global family offices and offshore institutional allocators. The recruitment last year of a full-time offshore distribution executive, Ingrid Nell, based in our Singapore office has continued to accelerate these introductions, resulting in eight new institutional investors across the group sourced from offshore and an increasingly attractive pipeline of additional client opportunities for the year ahead. Additionally, the extensive investment in operational due diligence requirements required or needed to successfully secure these institutional investments continue to provide strong endorsement of Regal's operational, risk and governance platforms both for our existing institutional investors and for those groups potentially interested in Regal's investment solutions. While strong growth is pleasing, however, it is important to stress that we will always seek to maintain the right balance between capacity and margin. It is not growth for growth's sake. And we will continue, where necessary, to ration the availability of certain investment strategies to ensure our performance, investment processes and available capacity can be best rewarded. As previously mentioned, while long/short equity strategies currently represent approximately 2/3 of Regal's FUM, the group has continued to evolve in recent years to provide investors with a broad selection of truly alternative non-equity strategies that generate positive return profiles that are uncorrelated to movements in more traditional asset classes such as equities and bonds. The benefits of investing in alternatives continues to be more broadly appreciated both as a source of positive absolute investor return in addition to the portfolio benefits of assisting in lowering overall volatility of returns and broader diversification. In this vein, I'd like to highlight a number of strategies across the group that we have recently launched that, I think, demonstrates the group's innovative and differentiated product offering and which I believe will continue to be a major beneficiary of the move towards more investors seeking alternative sources of return. You've previously heard us speak a lot about private credit. Private credit, as I've highlighted, has already seen strong support from family office investors seeking access to the regular income streams and the lower expected volatility that private credit investments can provide. Private credit entails lending capital to companies and private transactions secured over all or part of the company's assets. The borrower pays the lender an agreed interest rate payment, usually a floating rate above the current cash rate, for a fixed period, which is typically 3 to 5 years. In Australia, this activity has primarily remained the domain of the banks. However, in recent years, the withdrawal of more traditional lenders from the market has provided the opportunity for private pools of capital, such as Regal, to step into the space to provide funding. For investors, this can provide very attractive proposition for portfolios, including: steady, regular series of income payments with traditionally low levels of volatility, given that loans are not publicly traded; two, the ability to hedge or provide some protection against inflation and rising interest rates as most loans are struck at a floating margin above the cash rate. To take advantage of this dynamic, we have been delighted to launch the Regal Private Credit Opportunities Fund in October 2022, providing investors with access to a diversified portfolio of private loans, leveraging Regal's deep corporate contacts across the region. The fund was originally seeded from capital from Regal's balance sheet, alongside external capital from a number of family office and private investors, and 7 months in, is comfortably delivering on its target return of 8% to 12% per annum through the cycle. Staying within the pillar that we call capital solutions, Regal's Resources Royalties strategy provides a financing solution for resource companies. However, in this case, investors gain access to an agreed share of revenues generating from production rather than an interest payment. Resource royalties hold a long history in Australia of generating significant wealth for a number of families and institutional investors. And many investors would be familiar with some of the more famous royalty streams held by investors over long-term oil and gas assets in the Bass Strait or iron ore tenements in Western Australia. The Regal Resources Royalties Fund provides investors with exposure to an asset class that, whilst highly attractive, is typically incredibly difficult to source and access. In building a diversified portfolio of royalty assets, the Regal Resources Royalties Fund seeks to provide investors with an attractive, uncorrelated income stream with exposure to a number of different royalty streams covering various underlying commodities without any of the OpEx or CapEx risk with that commodity. Pleasingly, the performance of the strategy has been strong with the fund delivering returns of 28% per annum since inception. Moving to our real and natural assets pillar. The Kilter Rural Water strategy, and Kilter is a farmland manager as well, provides one of the best examples of a true alternative, given the return drivers for a portfolio of water assets that are significantly different to those that typically move global equity and fixed income markets every day. Established in 2014, the Kilter Water Fund provides investors with exposure to a diversified portfolio of permanent and temporary water licenses in the Southern Murray-Darling Basin. Investment returns are generated via capital growth, where the value of the water licenses increase as scarcity of water or demand increases; and income via leasing a portion of these entitlements to the end users of water, the irrigated farmers. As we could see on the image on the right-hand side of this slide, water has proven to be a highly attractive asset class with the Kilter Water Fund generating returns of approximately 14% per annum since inception with lower volatility than many traditional asset classes. Most importantly, for investors, these returns have been delivered with a correlation to the Australian equities market of negative 0.02%, effectively 0, highlighting the valuable diversification benefits that water can bring to a broader investment portfolio. And finally, we have been delighted to see the launch of the Attunga Capital's dedicated Carbon & Enviro Fund, which leverages Attunga's strong position as the most experienced power and carbon asset manager in Australia. Limited opportunities currently exist for institutional or private investors to gain exposure to the carbon market, despite significant anticipated growth in demand for carbon and renewable products over the years ahead. As an emerging asset class, price dispersion across carbon markets remains highly evident, providing opportunities to skilled managers, such Attunga, to deliver strong risk-adjusted returns for investors. In a similar fashion to water, carbon pricing has exhibited low overall correlation to traditional asset classes, again providing substantial portfolio diversification benefits for investors seeking to reduce overall volatility. In addition to our wholesale products, we are proud to provide investment services to three independent and ASX-listed investment vehicles. As mentioned earlier, these are available to retail investors and is currently the main way for retail investors to access Regal strategies, given our direct investors are either wholesale or institutional clients. The chart for each show the portfolio and share price return since 30 June 2022. And it's most pleasing to see positive growth in both net asset value and share price across all three. And it's most pleasing to see RG8's rise in NTA and share price over this period following the transition of its portfolio to the team led by Phil King. Moving now to RPL's 2022 results. Due to the merger occurring mid-year, it is best to focus on pro forma normalized earnings. Our net profit after tax on this basis was $24.8 million for calendar 2022 with $18.2 million in the second half. Management fees were $63 million with management fee margin of 115 basis points or 1.15% in the second half. This margin was lower than the first half primarily due to product mix, such as the award of the $500 million institutional long/short equities mandate, which began in September 2022. Product mixing of new sales will continue to be a key driver of the resulting margin. It's also worth noting that Regal currently manages approximately $600 million of capital on behalf of staff, where fees were fully rebated and places a further downward pressure on total management fee margin. In this regard, we recently announced that effective from 1 January 2024, the staff rebate will be adjusted to a 50% rebate. We estimate based on the level of FUM that this would change -- would generate a further $5 million in management fees per annum as well as providing Regal with the opportunity to earn performance fees on this FUM. Turning back to 2022. Performance fees over the year were $37 million and came from a range of strategies, including the Resources Long Short strategy and the Resources Royalties strategy, which I've previously mentioned. Against a very macro-dominated equity market, the performance of many of our long/short equity strategies has been challenging so far in calendar '23. However, in current markets, we are acutely aware that performance outcomes can change quickly. And we will provide an update on our first half '23 performance fee expectations in mid-July, when we announced our June quarter FUM and net flows. Perhaps for some additional context around the variability of performance fees, this slide shows that pro forma performance fees in 2021 were $164 million, which was a stellar result, showing the operating leverage that is available when all major strategies are performing well and above high-water mark. With regards to costs, they are also somewhat a little bit dependent upon performance fees as a portion of staff bonuses are also driven by performance fee outcomes but are also deferred by performance rights, which vest into RPL shares over 2 years, better aligning staff incentives with our shareholders. And as you will hear later in resolutions, due to Regal's merger with VGI, we also chose to offer some long-term grants, which vests over 3 years to key executives. A portion of these have financial hurdles and the grants are intended to incentivize and retain key staff following the merger. The Board is very mindful that this is a one-off grant. It is currently developing an ongoing long-term incentive plan for future years. We will share the details with the Board -- with the market when appropriate. But I expect this plan to be appropriately hurdled so that employees are highly aligned with our shareholders. Moving to our next slide. The balance sheet is strong. And to better illustrate that point, I can highlight that with $214 million of investment assets and cash as at -- as of 31 December, bolstered by the capital raise we did in late 2022, allowing us to explore growth initiatives, where they make sense. These include organic initiatives such as seeding new funds as well as inorganic opportunities. As Michael said earlier, the raising has also increased our free float and brought new shareholders onto the register. We have seen four broker analysts initiate stock coverage on RPL. And we thank them for their interest. Our final dividend for the year was $0.04 fully franked. And it represented a normalized payout ratio of 56% in the second half. Our policy is to maintain a minimum 50% payout ratio. But this may be flexed depending upon the opportunities that we see at hand. We currently have strong franking balances, which equates to 4x the second half '22 dividend. Turning to my final slides. From here, we see multiple opportunities for growth. We currently have $5.5 billion of FUM. However, we have the capacity of the existing strategies, is about $15 billion, 3x higher than today. And with current rate of growth in net flows and investment returns, we can quickly focus on the achievement of that outcome. We have significant client relationships in high-net-worths and family offices, which represent over 50% of our FUM. And if we continue to invest in our distribution capability, particularly offshore, then we will continue to grow those net flows, including the conversion of a growing pipeline of offshore institutional investors. From a technology standpoint, our proprietary operating platform remains highly capable and scalable. We also intend to take full advantage of the fact that alternative asset strategies have attractive tailwinds. And we are open to inorganic growth opportunities. My final slide here highlights how we're thinking about inorganic growth. To start with, we expect there would be further consolidation in the industry, both domestically and offshore. And we see key -- three key reasons for that. Firstly, if economic conditions in equity markets are more challenging in the future, we expect traditional asset managers to seek new avenues of growth. Secondly, the maturity of the first generation of boutiques, particularly in Australia, means they may be looking for generational change. And finally, smaller and independent asset managers are increasingly looking for a platform to enable them to scale and reach a broader cohort of investors. We continue to monitor a range of opportunities to add scale and expertise to the business. This may include smaller bolt-ons, for example, like our agreement to buy East Point Asset Management in Hong Kong announced earlier this year. But whatever we explore must not hamper our existing runway for growth, which is substantial. We will thus be very disciplined when looking at inorganic opportunities and will only proceed if we see financial and strategic benefits for our shareholders. Given our staff are significant investors in RPL stock, we are very aligned with you. Thank you for your support. And I look forward to updating you further in August, when we release our first half 2023 results. I would now like to hand back to Michael for the next stage of the meeting.

Thanks, Brendan. We'll now turn to the formal business of the meeting. I will take each item and resolution in the order they are set out in the notice of the meeting. Today, our meeting involves tabling and reviewing the accounts and six resolutions to be decided. In terms of logistics, when we reach the point for questions, we will start with online questions from the webcast first, then questions over the phone and then questions from the room. For those online, please remember, you can submit questions at any time during the meeting, just type clearly at the top whether it relates to our financial reports or write the number of the resolution or if it is a general question, which we will cover general questions after the formal business. As a reminder, for those on the phone, please wait until we reach each item of business before registering for a question on that item. [Operator Instructions] As we mentioned earlier, we will conduct a poll on all resolutions today, combining votes submitted before the meeting with votes to cast during the meeting, both in the room and online. Since the online poll is already open, if you would like to vote now, please do so. Alternatively, it is also fine if you prefer to only vote after we've discussed these resolutions. I will also allow some time at the end of the meeting for you to finalize your votes. For those voting online, if you make a mistake or change your mind, please just select your preferred voting option. And that will override the original vote. I note that boardroom, our attorney officers in today's meeting will conduct our poll. Certain votes will be excluded in accordance with the Corporations Act and the ASX listing rules. The proxy votes will be shown before the discussion of each individual resolution. I advise that the meeting, I will be voting all undirected proxies in favor of all resolutions as indicated in the notice of the meeting. As the results of the poll will not be available before the meeting closes, that will be released to the ASX and made available on our website later. Turning now to the first item of the formal business, which is the tabling of the financial report, the directors' report and the auditor's report for the financial year ended 31st of December 2022, the company is required to lay before the meeting the last audited financial statements and reports, which were released to the ASX on the 24th of February 2023 as part of the company's annual report. No resolution is required on this matter. However, I invite shareholders and proxies to ask their questions on the reports. Questions may also be asked of the auditor in relation to conduct of the audit, the content of the audit report, accounting policies adopted by the company and independence of the auditor's act in carrying out the audit. So let's start with the online questions. I'll ask Rebecca to read out the questions as they come through in the webcast. Rebecca, are there any online questions?

Thank you, Michael. There's a number of general questions that have come through. There is one that relates to a number of resolutions that I may read out. Did any of the five main proxy advisers, ACSI, Ownership Matters, Glass Lewis, ISS and ASA, recommend a vote against any of today's resolutions? Which of the proxy advisers are covering us? And have there been any material proxy protest votes? Will you disclose the proxy votes before the debate on each resolution, so shareholders can ask questions about the reasons if there have been any protest votes? Also, why not disclose the proxies to the ASX with the formal addresses like others now do?

Well, I think we can answer yes to the fact we will be disclosing the proxies. The second question on the advisers -- or the first question on the advisers, and I answered the second one, maybe, Brendan, you might comment on where we are in the world of proxy advisers?

On the way that we had one proxy adviser provide a report. And I need to speak to our Head of Investor Relations to get the details, just the second part of that question.

So Ingrid?

Thanks, Brendan. So we did have Glass Lewis just note that they recommended against Ian Gibson as the Executive Director on the Audit and the Remuneration Committees. The reasoning was just that there is a governance principle that, in general, they prefer to have all independents on the committees. But as Michael mentioned earlier, we now have four people on the Audit Committee. And so it's majority independent at this stage.

I'll deal with that question on Ian's position when we get to the end of election. So we covered all those issues, Rebecca, to your satisfaction?

One more question Michael. A question with regard to the four separate resolutions approving the issuance of shares to various Directors and third parties at the AGM. The question relates to whether or not this could have been handled under the 15% annual placement cap?

Well, the short answer to that is it has been. What we are now doing is seeking approval from the shareholders to enable that to be voted by them, which will then exclude it from the 15% shareholder cap. So we have already issued shares. This is a protocol as to how it is going to be satisfied in the 15% vote would then give us clear air going forward. So it's a capital efficiency issue from our point of view rather than the actual issue of the shares that's already been done.

Further questions on the web at the moment. So I might open the phone lines to see if there's any questions over the phone.

There are no phone questions at this time.

Okay. We now throw it open to questions from the floor.

Okay. I was surprised at the presentation because I think I met a number of the challenges facing legal. And potentially, there are some concerns I have with the Directors' report and the auditor's report. I just like to make a few comments. I do have serious concerns about potential brand damage to Regal. The gloss seems to be coming off. I hope that we'll stay on. In the past year, the share price is down from over -- well over $4 to the current $3. I'm confused, Chairman and Brendan, about the persons you made about the FUM. When reading the merger documents a year ago, the claim FUM was $5.6 billion. Clearly, the FUM at 31st December was near $5.2 billion. And now we read today, it's now $5.5 billion. But on -- based on your own reports, the FUM has actually declined over the past year. We note also that part of that is 0 fee paying or from 1st January next year, 50% fee paying and part of it is also not wholly owned. Big concern about the ongoing $180 million NTA discount to the sponsored VG1 and RG8. Concern also that even a Regal Investment Fund, which often had been at a premium is now at a discount. Also very concerned about the bad results in a range of unlisted funds. The Regal Tasman fund has lost in the last 12 months, 22.2%. The Regal Atlantic Fund has lost 46% in the last 12 months. The Regal emerging companies, 2 funds, has lost 24.7% in the last 12 months. The Regal emerging companies 3 funds, has lost 25%. And the Regal Emerging Companies Opportunities Fund has lost 23.1% in the last 12 months. Maybe the company is just becoming too fragmented. There are so many different funds. Maybe it's just too distracted. I'm not sure. But currently, a lot of the investors in the Regal funds are losing money. When -- the manager is winning. We are going to come to resolutions today about big incentive allocations to Brendan and Phil King and other employees. But if the manager keeps winning and a range of investors keep losing, that is unsustainable. I note also that Regal is trading at a very high percentage of FUM, around about 15% of FUM when you adjust for the cash. A lot of quality funds managers are trading at 2% of FUM. Such a premium rating on Regal, excellent results for all the investors are required as well as excellent governance. Otherwise, that premium rating will disappear. It's also trading at a huge PE multiple. And again, that may not be sustainable unless the performance improves. I'd also like to make some comments on the two of the listed funds, VG1 and RG8 sponsored by Regal and VGI. The original IPOs were initiated by VGI, which is now Regal. They charge management fees of 1.5% per annum and 15% for performance fee with no threshold. They're trading at excessive double-digit NTA discounts, VG1 18%, RG8 11%, which amount to around about $180 million of discount to NTA. The performance since inception of both those funds is extremely poor. In the nearly 6 years since the IPO at $2, VG1 is currently trading below the issue price. For the end of April '23, VG1 has a total shareholder return of 2% per annum based on portfolio values, which represents a capital loss, which is offset by dividends. However, based on the more important share price, which is the relevant thing for investors, VG1 has delivered investors an absolute total shareholder return/loss since inception, which is alarming. Turning to RG8. In its 3.5 years since the IPO at $2.50 per share, RG8 has delivered a total shareholder loss of 0.1% based on portfolio and a much larger TSR loss based on share price, alarming results. These terrible results for those two lot -- 2 funds compared with the often cited targeted returns, including in the prospectuses of 10% to 15% per annum. These investors are locked in a cage. They're unable to get out unless they cop a nasty discount. In contrast, the ungated investors in the VGI private fund have been able to get out of NTA. I'd also like to point out that over 2 years ago, Regal stroke VGI made detailed written representations in the letter dated 16th March '21, addressed to me and copy to [ Malcolm McHarness ]. The letter was signed by David Jones as Executive Director of VGI, which is now legally Regal, same entity. VGI and Regal are the same. Briefly, I'd just like to highlight a couple of extracts. The letter says we are in vigorous agreement with you that it's unacceptable for LIC to trade at a substantial discount for a sustained period. VGI Partners is working with the independent Directors of VG1 and VG8 to explore options to address the discount to NTA. This includes converting to an unlisted trust or a listed ATF, a large-scale buyback, a winding up or a merger of VG1 and VG8. The letter acknowledges these options would close the discount to NTA, in some cases, fully and in other cases, partially or otherwise allow shareholders to exit at or near NTA. The letter sites tax issues as an obstacle, but given the poor performance of VG1, any tax issue for VG1 or its investors would be minor. The letter notes the manager's consent will be required for some of the above options. However, there would be no consent or termination fee in the case of, say, a 50% buyback at NTA. Many highly credible funds managers have adopted structural options to provide their investors. Shareholders to whom are the Directors are producer duty, the right to exit at or near NTA including [ Elliston and Typadis, Monash, ALF ], et cetera. In addition -- agreed to corporate transactions that remove the discount to NTA. The closing observations of the Regal letter make the following representation quotes. We agree with you that it is unacceptable for the VGI Partners LICs trade at a large discount to NTA. It's something VGI Partners and the Boards of VG1 and VG8 are determined to rectify. It continues, we can assure you we are working diligently to achieve this in a timely and considered manner with the best interest of shareholders in mind. Sadly, since the March 2021 written representations, Regal has failed to rectify the substantial discounts every day that is causing major loss to shareholders who are selling at a punitive discount. My question to you, Mr. Chairman, I assume you would agree, Regal has failed to fulfill its written representation to rectify the discount that is causing huge loss to investors, $180 million of discount. Why has Regal failed? And what are you personally doing to honor the representation?

Thank you, David. I think there's about six questions there. So I'm not sure that many of them actually relate to the accounts or the conduct of the audit, but I'll attempt to deal with them in turn. Brendan, maybe you might just comment on this funds management reconciliation, which is, I think, possibly relevant to the accounts.

Yes, certainly. So we update the market on our FUM each quarter. Our April FUM announcement for the March quarter 2023 showed $5.5 billion of FUM. That included, if you see on the financial year or the 10 months to -- 31st March 2023, significant flows. And we've updated that now at today's AGM to include total flows for the 10 months to 30th April of just over $900 million of flows. So I think the difference in what you're referring to is obviously investment performance, which you've separately highlighted has obviously dragged down our fund, but notwithstanding that investment performance, our flows have been strong.

Listening to your presentation, which is a nice presentation, it gave the clear impression that Regal was growing. However, the documentation you issued at the time of the merger or VGI issued referred specifically to $5.6 billion of merged fund from a year ago. We now have $5.5 billion. So clearly, that is a decline, which is quite contrary to the manner in which you presented it today.

I'll just reiterate the disconnect that you're referring to there is growth from net flows. So we've got more clients who've invested with us today than we did 12 months ago. However, the mark-to-market of investment returns has impacted the absolute level of FUM.

Okay. The second issue, I think you touched on David related to investment performance by Regal and the comment on the performance of the number of funds and I think on that matter, I don't really see that relating to the annual report of the accounts. It's probably an item best dealt with in the general business section of the papers. So I'll take that one as an issue, which we can revisit at that particular point in time. All the other issues I would lump together under the issue of the LICs. And I've tried to make it very clear, but in the Chairman's address and in our personal conversations that LICs are separate entities, which have independent governance structures, which have independent Boards and will initiate their own actions in relation to capital management. Those actions do not require the consent Regal Partners. Regal Partners is a very small shareholder in both those organizations. I think 2% in the case of VG1 and 8% in the case of RF8. So that any initiatives at those independent Boards take would be something which is decided by the shareholders and our influence on that outcome would be absolutely minimal given our very, very small shareholdings. So I have, as I indicated in our previous meeting, written to both the Chairmans of VG1 and RF8 and stated our position asserting their independence and ability to make capital decisions in their own account, and they will respond to you directly, I'm sure, in relation to those matters. The David Jones letter of 2 years ago is 12 months before Regal had any involvement in this organization on a combined basis. And accordingly, I cannot see how the reconstituted Regal Partners Limited can be held accountable for statements that we made in the past. Now we can go and get legal opinions on this, but our commercial judgment is that it's not relevant to it. And if there's any issues you need you want to take up, I suggest you take them up with David Jones directly in his capacity as Chairman of the VG1.

Thank you, Michael. Look, the difference is that the letter was written on Regal letterhead, which at that time was called the...

It wasn't Regal letterhead, David. It was VG1 Partners Limited letterhead. Regal had no involvement, no contact to the best of my knowledge, with that organization at the time it was written.

Clearly, the Regal was acquired by VGI. Regal is currently the same legal entity that wrote that letter. The letter was written by an Executive Director of VGI, which is now called Regal. So I think Sarah, as the lawyer on the rostrum would agree VGI and Regal are the same legal entity. They just changed their name.

I appreciate the extension of the legal entity, but the question that goes to is whether with a complete change of management, the current Board can be held accountable for representations that may be made by a previous Board. And we can get a legal opinion on it. There's no problem. We can go and spend money. But as we sit here today, our commercial judgment is David Jones made statements and those statements are best taken up with David Jones in his capacity as Chairman of VG1.

So in his capacity that he made them as a Director of VGI, are you disowning David Jones' comments?

I'm saying they are not relevant to the commercial decisions of the RPL Board today.

All I'd ask Chairman is if you could get some legal advice. I'm sure Sarah would have a view. But I think when Regal -- backed Regal into VGI, it was fully aware of these issues. And I'd be very, very disappointed if Regal would disown written representations that were relied upon by investors that have led to damage. I'd be very disappointed if Regal didn't honor those representations.

We certainly take that on notice, David. But as I said, as we sit here today, our commercial judgment is that those representations that were made were made 12 months prior to Regal having any involvement with VGI.

Okay. Well, there's some legal issues as well, Michael. So if you could get some legal advice, that would be good.

Absolutely. We'll take that on notice. All right. Is there any other questions? Malcolm, welcome.

Thank you, Michael. [ Malcolm McComas from Mr. McComas Capital ]. I'm concerned that there's commentary from you in the annual report that is, in my opinion, misleading at worst and glossy at best. The material in the annual report perpetuates the miss that everything is good inside the house of Regal. It's clear that some people have influenced in Regal are not prepared to acknowledge the VG1 and RG8 LICs failed to meet their target returns of 10% to 15% over the cycle, Michael. That was also a representation made by the predecessors in management roles of your company today. And I'm sure you're not walking away from those. Those roles are now structurally flawed. That's not good for Regal or for shareholders. And as you know, David and I have been having ongoing discussions with David Jones over the last 2 years regarding the shocking financial performance of these two LICs. There are obvious capital management and portfolio management initiatives that you could be taking to fix the problem of them both trading at worst-in-class discounts. But to date, you've done nothing structural to solve this problem apart from your recent disclosure that you've written letters to the Chairs of these organizations. Michael, as you know, this is a $180 million issue for the shareholders of VG1 and RG8. It's material in the context of the combined capital of the two LICs of approximately $1.1 billion. So that's a problem that Regal has with approximately 25% of its fee paying FUM. That's material to Regal, and therefore, it's very relevant to this meeting today. The problem also has the potential to cause significant and ongoing brand damage to Regal and needs to be addressed. Regal, under its old name of VGI, created these funds. They were more than half of VGI's total FUM. So they were also very material to VGI, now Regal Partners, then and remain material to the enlarged Regal now. In relation to a couple of other comments you made, I think it's just ingenuous to suggest that they do not cross line between Regal and the Boards of VG1 and VG8. And I was truly rocked to learn that this communication you've had with Lawrence Myers at VG8 is, in fact, the first communication you've had with him since taking over the role. As you mentioned, I think Brendan mentioned in his presentation, there are customers. Rule #1, look after your customers first and keep them close. I think you're ignoring that rule in your separation of duties in a technical legal way rather than a commercial way that you addressed before in those two organizations. So turning first to you later. I've got some specific comments and then a question. The $5.2 billion claim in the first power of your letter is -- it just fails the pub test, Michael, with $800 million or 15% of the fund being managed for the King family staff and charities no fee, that's a very material $12 million income concession that benefits everyone but Regal shareholders. Regal, in fact, manages $4.4 billion of fund under the old numbers and a further $800 million of concessional rates would have been perhaps a more technical expression. It was only when we pro perform a management of Regal at last year's AGM that they revealed the details surrounding the rebate that you were handing out to your associates. And since then, we acknowledge that Regal has agreed to rebate 15% of the fees going forward from 1st of January, which is a commendable initiative, thank you. The second point is that you talk about the driving force of the merger as being complementary product offerings and client relationships. I characterize the merger was that white flag takeover event that happened in circumstances where the VGI team had lost its way as a listed fund manager. It came after many departures of key staff and a co-founder. VGI had terrible bottom of class performance across both at LICs, VG1 and VG8, now RG8. And at the same time, both LICs were trading under water in an 18% to 20% heroic discount to NTA at the time. I acknowledge also that, that has been improved in both cases under new management, and that's pleasing to see. Regal clearly saw it as an opportunity to capture several billion of additional listed FUM, wholesale and listed, and a chance to enhance performance from a low base and a liquidity event, obviously, for its founding shareholder and key staff. Disappointingly, the share price is down 25% from this time last year, which says that the market doesn't fully support the same optimism that you've articulated here today. I happen to think the former VGI shareholders and the VGI customers are better off under Regal management under the guidance and wisdom of Phil King who let's face it, is the very public face of the Regal brand and a very influential human inside the organization, I am sure, but we'll come to that point later. The next issue you mentioned is very important. You talked about Phil King stepping away from Board responsibilities to focus on portfolio management. In my opinion, this initiative has been manipulated by executives of the new company to avoid having to disclose Phil's compensation as a key management person in the remuneration report. This is wrong for just so many reasons. I think it's a sham to avoid disclosure of compensation for the most important person within Regal. Apologies, Brendan, I rank you as #2 in that lineup. But Phil and his very happy face of Phil is the king of Regal. But he's been airbrushed out of the family photo to cover up disclosure of his compensation. Phil, I think you're being far too modest here. And Michael, it would appear that you've rolled over on this key issue with no meaningful explanation in the annual report or in the remuneration report, but that's something we can come to in more detail on the resolution 1. You talked about strong funds inflow, and David has addressed that issue in some detail and helpful reconciliation from Brendan is also helpful. But again, you failed to mention the $180 million discount to NTA that VG1 and VGI are currently trading at. You talk about fees on gross FUM, delivering unacceptable performance and that ignore the structural issues that you could adopt to give shareholders access to their NTA. The manager gets richer. The shareholders in VG1 and VG8 get poorer. We've talked about the financial parameters of Regal, trading at the price that it does, but I won't dwell on that. You mentioned that Regal will always seek to nurture and protect relationships with shareholders and clients as a priority. Michael, I don't see how you can make these statements is I don't think you've done much at all to nurture and protect the interests of our entities in regard to the losses that have been incurred by us and many others in VG1 and RG8, refusal by your company to engage with us as shareholders and the Boards of these two satellite identities for a material buyback of shares at NTA or a reorganization of these two LICs to provide for redemptions at NTA is a fundamental breach of fiduciary duties by Regal. If you truly believe this statement, you would have insisted on sitting down with the Board of VG1 and RG8 and recommend to restructure to give shareholders access to their NTA. I would have called that a first 100 days event in your Chairmanship. I'm calling on you personally to intervene here and to initiate the discussions with David Jones and [ Laurence Mines ], and I'm pleased that you've actually put pen to paper on that issue. I don't think there's any more time to waste. I would urge you to be a fixer of this issue and not become the problem. Yes, it will likely marginally reduce fund to Regal, but not by much, but it will generate considerable goodwill to the thousands of shareholders in the two LICs and resolve the toxic effect these two failed LICs are bringing on Regal. My question is this, will you give a commitment to this meeting today, which shall take steps to recommend the Board of both VG1 and RG8 to restructure to facilitate redemptions at NTA? I don't think this issue needs any further deliberation. You've had a year to look at it, and your predecessors have had 4 years since inception to look at it, and it hasn't gone away. And if you won't do that, could you please explain why not? And alternatively, will you consult with the Boards of VG1 and RG8 to renegotiate substantial buyback of up to 50% of capital to allow shareholders to realize their NTA? It's two pretty clear options. I know you're very familiar on the pathway to achieving those objectives because we had a common interest in resolving the exact same issue at Australian Leaders Fund 2 years ago, which was a happy outcome for shareholders. Thank you, Michael.

Thanks, Malcolm. I was to summarize your questions. I think you basically replowed the ground that David raised in his. I didn't see anything that we hadn't already dealt with, and I would simply reiterate and I can only keep saying this because we just seem to have a fundamental difference of opinion as to our relationship with LICs and the role of the independent boards of those two organizations. So I'll say it again, and I don't intend revisiting anything to do with the LICs after I answer this. That is we are an investment management service provider to two LICs. Yes, as our client, Brendan can articulate, we are very attentive to their needs in relation to matters that have regard to day-to-day issues on their portfolio. As Brendan highlighted, the performance over the last 6 months for the two LICs in terms of what we can control has been more than acceptable. On the issues of capital management, the LICs independent entities, and they will make their own decisions in relation to that and what initiatives they wish to institute. It is not appropriate for us to become a party dictating to somebody who is completely independent as to how they should run their personal -- sorry, their corporate affairs to those organizations. It is just ultra virus. So I can only restate and as I said, I'm not revisiting this issue again because it is very clear. Our position, you fundamentally have a different view and on that point, we agree to disagree.

Well, you've written kindly to David Jones, and we see David Jones in the street so -- and we've organized a meeting with him in the next short while. Lawrence Myers has blocked us on his e-mail. You've written to Lawrence Myers you say, but have you actually spoken to Lawrence...

I have not. I have never met Lawrence. I would not know what he looks like if I pass him in the street. The interaction with Lawrence is based on a very similar letter that I wrote to David in his capacity is Chairman of VG1, and I understand he is meeting with you. Lawrence, as all things, will make his own decision as to what he wants to do. If you think you are being inappropriately treated by Lawrence, then I urge you as a shareholder in those organization to pursue your perceived legal rights directly with him. There is nothing more that can be done at the Regal Partners Limited level. Our client, we provide investment services management to them, and we are a small shareholder in both those organizations. We do not have any power of veto over any capital management initiatives they may we wish to institute, and there is a termination fee, which is payable in the event that our services are terminated, which is roughly the equivalent of 1 year's payments for contracts which have of the order of 5 years to go. So the financial penalty is disproportionate to the length of our contract. But they are all matters for VG1 and RF8.

We look forward to our annual conversations with Lawrence at the Annual General Meeting. And I look forward to a known Lawrence for a long time in cutting in finance circles, but it's just an incredible lack of respect displayed by Lawrence and content actually for our shareholders. And it's a serious governance issue that you should take note of and I'm sure you can assist and facilitate that interaction with Lawrence.

I do not believe there's anything more I can do in relation to Lawrence Myers beyond the letter that I wrote to him, which is very similar to the letter I wrote today David Jones. David Jones has initiated contact as I understand it, and Lawrence will make his own decision as the Independent Chair of RF8.

Look, I just might take the opportunity while I'm on my feet, to ask my second question.

Second or 22nd?

I've only asked one so far.

Sorry.

Yes, yes, yes. I write to Brendan recently to point out the recent example of Equity Trustees in the Partners Group who announced on the 2nd of May, a proposal to delist the Partners Group Global Income Fund. And the PGG announcement said this, Partners Group is firmly of the view that PGG is a highly attractive fund, but it continues to trade at a significant discount to its net asset value. Both Equity Trustees and Partners Group, Equity Trustees being a responsible entity, and Partners Group consider the fund would be more appropriately operated as an unlisted fund with monthly redemptions and subscriptions based on NAV. So I said to Brendan, it's time for action and he's had time to reread David Jones' letter. But there's another worked example together with the six other precedents that have occurred in the last 2 years to wind up and reorganize and hand shareholders back their NAV in listed investment companies. Even Jeff Wilson has actually taken the initiative to step back under the ALF model that we participated, and you new nominated me and Rob Ferguson to be Directors at a special general meeting of the Board of the company with a single mandate to seek a redemption of a reorganization of that company to get cash back. You had a very substantial cash investment in that business. And you signed a requisition along with 20 other institutional investors and high net worth individuals to appoint us to the Board. We didn't get to a Board meeting, but we negotiated an outcome which saw a reorganization of that LIC and a conversion to it as an unlisted fund with redemptions of NTA. You banked your 20% premium over that. Yet you won't take any action here to do exactly the same with VG1 or RG8.

Malcolm, just to make it clear. I know I said I wasn't going to repeat myself, but I will for the sake of -- saying it again, if you wish to initiate that action with VG1 or RF8 then you should directly engage with the shareholders of those organizations in order to bring about those actions you wish to take. It is nothing to do with RPL. It initiate the corporate actions...

We have written this as you probably have seen, twice or 3x to those shareholder groups. We've had an e-mail line. We've had direct communication with very substantial shareholders in that group. They're all unhappy. Yet you, as the new manager, are not actually taking any steps to actually turn the books around on this one.

We are taking the steps of managing the money to the best of our ability to produce the best returns for shareholders in order to minimize and narrow the gap between NTA and the share price. And as Brendan indicated, we believe we have done quite a good job over the last year in terms of the performance we've delivered on those funds, consistent with our management agreement to provide investment management services.

Michael -- I have to say, Michael, in conclusion that I'm disappointed, and I think it's that you're denying VG1 and RG8 shareholders a liquidity event when you sought to force the liquidity event for yourself at the Australian Leaders Fund, when you had considerable personal investments in that fund. You did it for ALF. Why won't you come out today and support a similar incentive initiative for RG8 and VG1? That's a rhetorical question, Michael. You don't need to answer it. You always covered the issue very well.

All right. Yes, David.

My second question, I won't be too long, Michael.

Thank you.

What you say, and it may be we agree to disagree. It may be that Sarah, a very good lawyer expresses of you as well, being on the take of this panel also. But clearly, Michael, you are taking diametrically opposed approach to the approach of your fellow Director, David Jones, who is the Director of this company until this morning. He's the independent Chairman of VG1, who in March 2021, took it upon himself as an Executive Director of VGI, which is legally Regal Partners, same legal entity, he took it upon himself to make those representations. Michael, you are running 1 million miles from that now and raising a legal issue, which I think is semantics to be frank because Regal and VGI were the sponsors of these entities. You're not really an arm's length, just a little contractor. VGI and RPL were the sponsors of these two LICs. But David Jones, your fellow Director until this morning, he wrote a 5- or 6-page letter, taking ownership of this issue on behalf of Regal, and yet now the new Chairman is disowning David Jones, throwing him under a bus anyway. That's that. But let me ask you one specific question, Michael, in the event that David Jones at our meeting next week and after some deliberation and I'd also say, Lawrence Myers corporate governance is nothing short of disgraceful. It's an embarrassment for the whole group to block e-mails from intelligent investors to not respond to the rest of e-mails that were passed to him by Ian Cameron, his performance is a disgrace. So we may need to write to ASX or the ASX for a funds managers Chairman to behave like that is just a blight on the whole of Regal, Brendan, that will not hold you in good stead. But let me ask you a question, Michael. In the event that David Jones, who at least is prepared to meet with us, thank you, David. In the event that he says, yes, we have $1.96 of NTA. And yes, shareholders who want to sell have to sell at $1.62. Oh my God, I'm a genius says David Jones. Yes, if we offer them $1.96, wow, of course, they're going to love that. You'd be knocked over in a rush. It's not a particularly big challenge to form that view. So in the event that David Jones no longer compromised by being on both Boards with a massive conflict, in the event that he decides, yes, it is in the interest of shareholders of VG1 to try and secure them access to NTA. In the event that he pursues that, if he puts that to you, Michael, as Chairman of Regal, I appreciate you can't carry the whole Board. You are one vote on the whole Board. But in the event that David Jones decides to fulfill his fiduciary duty to the long-suffering shareholders of VG1 and puts a proposal to Regal that we should allow them access to NTA as many, many, many other reputable funds managers have done. Question to you, Michael, with your personal hat on as a Director of Regal and given the ALF example that Malcolm has elucidated on, would you personally support that proposal, if David Jones puts it to you?

David, it's a hypothetical question, and I'll deal with it at the time that David puts the proposal to the Board. But I note Regal has a shareholding of 2%, I think, in relation to that and we'll have to make a decision about how we vote those shares and 8% in the case of RF1. But we cannot deal with hypothetical situations at this point in time. And I encourage you to have your discussions with David to put the points that you believe are in the best interest of the shareholders of those two organizations.

I've always admired you Michael as a very intelligent person, a man of integrity -- a couple of question marks today. But Michael, I never thought of you as a politician. You have runaway and hidden behind the politician's classic answer. He didn't like the question, so the politician says it's a hypothetical.

David, I can't answer because I don't know what the nature of the proposal would be. It could range across the whole broad spectrum of different solutions. It's a hypothetical question, and we will deal with it at the time it's put to us. And we will deal with it in relation to the legal rights we have under the management contract, and that will be our response to it.

It was the identical proposal that went to ALF, where you had an uplift from $0.80 on the dollar...

David, we don't know that's what the proposal is going to be, okay? The proposal will be dealt with when it's put to us and you should raise your concerns directly with David. And if he is able to take the rest of the Board with it in terms of wanting to initiate that, we will deal with it at the time.

Work in progress, but it's going to be a festering saw. A year ago, everyone said that Regal was going to fix the problem but they have failed to fix the problem. And I would finally say again, in my opinion, and I do have legal experience, there were written representations which are incredibly clear cut and Regal as it was then called VGI, have failed to honor those written representations to deal and remove the discount. Thank you.

I think the letter has to be reviewed by an appropriate legal person. And whether they're representations or theoretical alternatives, somebody with a legal skill set can determine that much more accurately. But I'm saying, as we sit here today, our commercial judgment is we're not going to be held to account for decisions we made 12 months before we became involved with VG1 Partners.

Excuse me, Michael, just a short follow-up question on that. Has Sarah [indiscernible] seen the letter?

Sarah, could you just answer yes or no to that?

No, I haven't seen that.

Okay, no.

There are a number of general questions that have come through, and I'm conscious of making sure we have enough time at the end to answer those questions. And I can confirm there's no more questions or comments on the financial report, Directors' report or auditor's report, online or on the phones.

That's encouraging. Okay. Well, I think we just do with the general business when we get to the general business, that's okay, Rebecca. All right. So I believe we are now in a position where the annual report, audit report, et cetera, has been presented. And as I said, no votes required in relation to that. So we simply note that and the questions we've had from the audience. That then takes us on to the first resolution, which is the remuneration report and that is required to be voted on. And the corporation's -- listed companies are required to include as part of the Directors report, a remuneration report, a remuneration report for the financial year ended December 31, 2022, was included in the company's 2022 Annual Report. Corporation Act requires companies to put to shareholders a nonbinding vote to enable shareholders to voice their opinion on matters included in the remuneration report. Given the vote is advisory only, it does not bind the Board or the company. However, the Board will take the outcome of the vote into account when considering future remuneration decisions. The Board recommends shareholders to vote in favor of adopting the 2022 remuneration report, and I will now move this resolution and show the proxy votes on the screen above. Okay. First -- 100% vote in favor. You can see the proxy votes on the slide. Open votes in favor of the chair of the meeting at the time of the meeting will be voted in favor of the resolution. Adjusting for these, the numbers are up there, 139,595,570 in favor, 9,908 at my discretion and 4,354 against, this equates to 100% full, 0% against. Are there any questions in relation to the remuneration report?

And I'll start with an online question.

Yes, that's where we start. Thank you, Rebecca.

I have a question on the remuneration report as it relates to Phil King last year. And the question with regard to whether you will commit to disclosing Mr. King's payment going forward and the decision-making process around whether it was disclosed or not -- sorry, whether Phil requested that his pay not be disclosed or whether it was a decision of the remuneration committee?

Okay. I think this matter was touched on earlier, but I'll just restate it. Phil is not a KMP. He's not involved in the management of the company. His role is to manage the money. And in those circumstances, there is no disclosure required in relation to Phil's remuneration. That is the legal advice that we have and the same applies to Rob Luciano, who is also deemed to be not a KMP, the organization. So there's no disclosure required, and there will not be a disclosure required as long as they are not KMPs.

Thank you, Michael. There are no more questions online, and I'll now move to the phone lines and open the phone lines. Operator?

There are no phone questions at this time.

Malcolm?

Michael?

Yes.

This is the elephant in the room. Phil King not being regarded as a KMP. This is misleading and deceptive, did not acknowledge King as a KMP. He is the founder of this organization. He owns 60 million shares or whatever. It benefits from low fees on $600 million of his personal fund. Every broker in Australia and overseas calls it Phil King's Regal. Every journalist story refers to Phil King's Regal. The suggestion that key decisions are not discussed with Phil and that Brendan doesn't take instructions from Phil is just ludicrous and does not pass the pub test, particularly as remuneration-based comp, short-term incentive, long-term incentive, dividends, cost savings on firm as a collateral benefit suggests that his compensation is both material and should obviously be disclosed in the context and size and who knows what it is of the total compensation for the business. My questions are, what task does [indiscernible] performed to qualify her as a KMP? And what tasks does Phil King do that exclude him from being considered as a KMP? This is a very technical issue, Michael. I'm not sure whether you're across the detail of what constitutes it and what inquiries one has to make. And I have a follow-up question for the auditor, I think he's here. Is [ John Corbett ] here?

He is indeed.

John, well, you'll have something to share on this issue, but I'll reserve John's questions, Michael, for my second question.

Okay. I think the way I might do with this is state -- the legal advice is very clear that Brendan is the CEO of the organization. And Phil is not a KMP, and Phil takes his orders from Brendan in relation to all matters other than managing the money. There are other KMPs within the organization but Phil and Rob are not one of them. They are focused totally on managing the money. That is a legal definition that applies in this case and that's the legal definition we go to. Maybe, Brendan, you might just comment on the management from your perspective, because you are the KMP as far as that goes.

Thank you, Michael, I think you've given a great answer. That's exactly the case. We entertained this question when the Board first came together. It was very clear, backed up by the legal advice that Phil was not a KMP. The KMPs besides the directors, are Ian Cameron, who's group CFO; and myself. The Board has been charged with this strategic direction and the governance of this business. There is no doubt that Phil in your references is a shareholder, he is consulted from time to time in the context of being a shareholder, as relates to business. But any other interaction with Phil is in respect of him being the Chief Investment Officer of our Long-short Equities division and in that regard, he's the employee that reports through to me, in the same way that Jacob Poke, who's the portfolio manager that leads our Product Credit Strategy, reports through to me.

I'm sure that's a very happy conversation at the remuneration committee about comp and what's been achieved and what hasn't been achieved. But have I misread the accounts. Isn't Sarah Dulhunty also listed as a KMP.

I said the directors are KMPs.

All the directors?

Correct.

Jaye is not listed as a KMP? Is it just because Jaye is a protected species and a representative of the former 3-year deal from last year?

No, your question goes to the definition of key management personnel, and so directors and the key executives, being Ian, Cameron and myself.

So other than being a director, what special actions does Sarah Dulhunty perform to qualify her as a KMP? Or are you saying that it's purely the fact that she's a director?