WAM Capital Limited (WAM.XA) Earnings Call Transcript & Summary

Good morning, and welcome to the 27th WAM Capital Limited Annual General Meeting. This is a hybrid meeting held both online and in person here at the Museum of Sydney. I'd like to acknowledge the Gadigal people of the Eora Nation and pay my respects to elders past and present. And thank you all for joining us and for your continued support of WAM Capital over the last 27 years. Anyone here is an original shareholder in WAM Capital? Good work, good work. It's quite a good percentage. I'm sure when you put your shares in at $1.10, $1, and you had a 1:1 option $1.10, which we never succeeded to get those exercised. And then you had -- I think you got your $0.04 of dividend that year with an $0.08 special and a $0.06 dividend the next year with an $0.08 special fully franked, and they were trading at a 20% discount, you were disappointed. Luckily, over time, they've traded at discounts and premiums as we've seen. And we'll talk about the rest a little later. The -- before I begin, there's a disclaimer that will be displayed on the screen. If you can please have a read of that. I'm Geoff Wilson, Chairman of the Board of Directors. And with me today are my fellow directors, Dr. Phipp Ryan on the left here, Angus Baker -- sorry, Barker. I've got to put my glasses on or off, James Chirnside. Now online, we've got Matt Pancino and Kate Thorley as an apologies. Acting in capacity as moderator is our Joint Company Secretary of Wilson Asset Management -- sorry, Joint Company Secretary and Finance Manager of Wilson Asset Management, Linda, who will assist in addressing any questions received during the meeting. The auditor, Richard is -- Richard King from Pitcher Partners is here to ask any specific questions as well. It's a little after -- well, it's 10:05, and a quorum is present, and I declare the meeting open. The Notice of Meeting has been circulated to shareholders. In the absence of any objections, I will proceed on the basis of the notice of meeting being taken as read. I encourage you to read the Chairman's address in detail, and I'll just make some particular comments. Shareholders who have logged on to the -- sorry, that's been announced to the ASX, so please -- and we'll be e-mailing it out to shareholders. Shareholders who have logged into the webinar with your username and password will have the opportunity to submit questions online and ask any audio questions as well as vote on the resolutions. If you're joining us online, questions can be submitted at any time. For those shareholders joining us online who wish to ask a verbal question, an audio question facility is available during this meeting. For those shareholders joining us in person, please raise your hand, and we'll bring a microphone to you. Voting today will be conducted by way of a poll on all items of business. And when I open the poll, the voting icon will appear on the navigation bar. Simply select one of the options to cast your vote. If you change your mind, select another option. I now declare the voting on all items of business to be open. You can vote at any time until the proceedings -- until I declare the voting closed. I'll give you a prompt when that occurs. So just going to the formal Chairman's address and the couple of pages that we announced -- or the few pages we announced to the ASX. Obviously, this is the AGM for the period to June 2025. And if -- I'd like to -- on behalf of all shareholders and myself being a shareholder and yourselves, all other shareholders here and probably all the shareholders of WAM Capital, I'd like to thank and acknowledge the performance of Oscar Oberg, who's here with us today, the lead portfolio manager and his team for their excellent performance over the last 12 months and over the last number of years. The investment portfolio increased, and this is before -- this is looking at it against the index, so it's before all costs, 22.2%. And that's outperforming the all odds by about 9% and outperforming the small odds by 9.9%. So it was really an exceptional performance. This allowed the Board to continue to pay the dividend, which is -- it's a super sized dividend in terms of the -- on the size of the assets. And it was only because of the excellent performance that allowed that to occur. The dividends, that we still -- they're still not fully franked. There is -- because people understand how we pay the dividends, we create a profit reserve and then we pay it out of the profit reserve. That doesn't mean we've necessarily paid tax. So the tax may come later. And for those -- all those that have been shareholders along the way, you'd be aware that WAM Capital has always been a very high dividend payer. And you've got to remember, your return is a combination of -- it can be a combination of capital and dividend, but that's usually when you're getting a low dividend yield. Because our dividend has been so high, then some years, we've been paying out more than what we've earned. And that isn't -- you can't do that forever. In terms of dividends paid out, I think it's about -- on the initial dollar IPO, it's $4.68 has been paid out in dividends and franking credits since we floated the company, which is about $2.1 billion. So in terms of -- and again, just thanking Oscar and his team for the performance, particularly over the last -- was it 3 or 4 years because I know as a Board, we were sitting -- we were ready to sit down at a Board meeting. Was it January -- Angus, you're good with dates, which January was it when we're going to cut the dividend in the half? Is that 1.5 years ago? Yes. So -- and it was really the excellent performance of the underlying manager. And if you look at on NTA, we're paying out close to -- well, we're paying out close to 10%. And to achieve that for shareholders, it's 60% franked. So we've got to do -- that's -- you got to pay the tax to get the franking. So that's 13%, and there's 1% management fee. So we've got to do 14% or 15% per annum to continue doing that. And to date, that has happened. So that sort of gives you a little bit of history and a little bit of background. And please, if you've got any specific questions on that, we can touch on that a little later. In terms of the investment portfolio so far to date, this year, this is the period from the end of June to the end of October was up 10.5%. So again, had a solid performance, outperforming the small -- sorry, the all odds again, which was by about a little over 4%, but slightly under the small odds over that period as well. The -- now I'll conduct the formal part of the meeting. There are 4 items of business at the AGM today as set out in the Notice of Meeting, 3 items are to be voted on. The Notice of Meeting and explanatory memorandum was circulated to shareholders. In the absence of any objections, I'll proceed on the basis that these items are taken as read. I note Boardroom are the returning officers for today's meeting and will conduct our poll. I further note, resolution 1 is subject to voting exclusions as outlined in the Notice of Meeting. The Board recommends approval of each resolution. And as Chairman, I'll be voting all open votes provided to me, for, each resolution. We'll advise the ASX as soon as the results are determined, which will be later -- which will be a little later today. You may submit your questions or comments you have on the financial reports -- our financial statement and reports now. The first item of business is to receive and consider the financial report, the directors' report and the auditor's report for the company for the year ended 30th of June 2025. I mentioned Richard from Pitchers is present, so you can ask any specific questions of the auditor. There's no resolution on this matter as required. Are there any questions on the room -- in the room on the report? No, any questions online? No. So Resolution 1 is the adoption of the rem report. You may submit any questions or comments online now. The proxies are on the screen. For the open proxies, which have been granted to the Chair, I'll be voting in favor of the resolution. Do we have any questions in the room on the rem report? No. Any questions online? Yes. Sorry, the proxies. What happened to the proxies? Come on team -- outsourcing. Okay. As there are no further questions or comments, I now put the motion that the resolution be approved as set out in the Notice of Meeting. If you're a shareholder or a proxy holder and eligible to vote online, could you please complete your vote for resolution 1. [Voting]

Resolution 2 relates to the reelection of Dr. Philippa Ryan. Now Phipp, would you mind saying a couple of words about -- Well, we know how valuable you are as a Board member, a bit about your background and so shareholders can ask any questions. Thank you.

Thank you, Geoff. Thank you for the opportunity. So yes, my name is Dr. Phipp Ryan. I wrote a page Turner called Trust and Distrust in Digital economies. That's not a plug. The Page Turner comment is actually me being a bit sarcastic. So that was based on my doctoral thesis, which I completed about 12 years ago at the University of Sydney, which was all about the liability of third parties for breach of trust. Prior to that, I had worked full time, first of all, at Allens as a commercial litigator and then as a barrister at the New South Wales bar, and I remain a member of that fine association. I currently teach into the master of laws at ANU, 3 courses that I designed and they are related to cyber law, the law of crypto assets and another subject called -- basically, it's around the law of trust and distrust in digital economies. So digital economies and the law. So I teach those on an annual basis to about 155 students in each one of those subjects every year, which is the maximum ANU allows. They're very popular. As well as that, I do a lot of volunteering. I am a qualified bushfirefighter, which is necessary in the area where I live. And God bless them, I am the coach of one of the most successful junior debating teams in New South Wales, and they're just a little local rural comprehensive high school. And we're not so off all the selective schools, which is awesome. So other than that, I live with my beautiful husband we've got 4 kids, grandchildren, and I am a very proud WAM Capital shareholder. I've been on the Board since I think, April 2018. Yes. And prior to that, I was on the Board of Lander & Rogers for a number of years. They've got a statutory cutoff as does the Australian government's Treasury Department where I was on the Audit and Risk Committee for the statutory 3 years for an appointment there, take any questions?

Thanks. Any questions to Phipp in the room? Any questions online?

I've got one here, Geoff from Craig Woolford. Does the Chairman or the Board -- sorry, does the Chair or is the Board considering to have any dividends fully franked? Does the Chairman or the Board have a date for if or when the dividend will be fully franked?

Why don't I take -- I'll take that at the end, under general questions after we've done the directors. Okay. Any other specific to the reelection? Linda? No. Okay. Great. So we've -- thank you. Phipp, have we got the proxies yet? We got the -- from our perspective is, I actually think we've got an exceptional Board at WAM Capital, a really good high-quality group of people with different areas of expertise. And as you'd see from Phipp, an area of expertise that we haven't gotten, she brings from a legal perspective, but also that trust and the crypto side is of great value to the Board. So the proxies, you see them on the screen. So there are no further questions. I now put the motion that Dr. Philippa Ryan be reelected as set out in the Notice of Meeting. If you're a shareholder or proxy holder and eligible to vote online, could you please complete your vote for Resolution 2. [Voting]

Resolution 3 relates to the reelection of Director Dr. -- sorry, Dr. -- Mr. Barker and Dr. Chirnside. I'm having -- I think we're all getting over the flu. Agnus is getting over the flu. I'm getting over the flu. Yes, Director, James Chirnside. James, would you like to say a few comments? Do you want to pass down the -- you got microphone? Around yourself, why the shareholders -- why you're -- okay, that's not working.

Thanks, Geoff. I think Wilson Asset Management is the best fund management group in the country. They're very open, transparent, proactive through Oscar and his team and Katrina is sitting down in the front also, really top globally significant fund management skills as well as corporate skills, which is a big part of what goes on behind the scenes. So I couldn't wish to be -- I could not possibly wish to be associated and working with the WAM Capital Group. About myself, just very briefly, I've been in commodity trading, proprietary trading for banks, fund management, always been involved in closed-end funds, as I refer to them, which is what we have here, LIC, overseas and here and always found it a fascinating area. I think it's staggering the sort of yields that are being generated through dividend payments on some of these leaks at the moment. There seems to be a sort of industry-wide concern that is sort of out of favor, he discounts and all the rest of it. But I mean, if you've got your money with good groups, honest, trustworthy, transparent people, you won't find better yields on almost any investment in the country or even in the world. So I'm thrilled to continue being a long-standing director, long associate of Jess and a great friend. And thank you very much. And thank you to shareholders for all the support that you have continued to show for WAM.

Thanks, James. Now we should ask, Phipp, does that make James unindependent?

I can actually speak to that. You've asked the wrong person. There is a lot of scholarship about whether NEDs actually need to have skin in the game to have independence. The Australian Institute of Company Directors has published widely very well researched material that's available online if you want to look at it because this question comes up about do we have enough skin in the game? You do not need to have skin in the game. And if you do have skin in the game, it doesn't necessarily mean you're not independent. And the AICD is quite clear on that. So you're probably really sorry you asked that question for me. Sorry, Geoff. Don't do any more of those.

Any questions for James, please? Any questions online? James? No. Look, thank you, James. Thank you for the comments. The -- Yes, please.

You made a comment that the performance of WAM is on a par with anything in the world as an LIC, listed investment companies a popular form of investment in other Western industrialized countries to the extent they are in Australia?

Good question. The WAM performance against other closed-end funds because that kind of incorporates all different types of structures in different jurisdictions, but same deal where you've got the investment portfolio, you've got shares trading around that. There is a very large number of closed-end funds around the world, huge number, actually thousands. It's particularly strong in the U.S. and in the U.K. They call them a different name over. They're investment trusts although they are a closed-end capital structure. I think you've got to look at performance on these things usually with a view to the volatility, the standard deviation of return. I think if you look at a risk-adjusted return on WAM Capital, you would be seriously -- I mean, I'd be -- I challenge anyone to find a lower volatility return equivalent to WAM Capital anywhere in the world. The share price moves, we all know that, but it doesn't move very far from its mean. And the returns and particularly in Australia with the imputation credits which thanks to Geoff, we still have in place. It's an amazing return. A lot of people sort of say, give us some capital growth. Well, the slide before that was up there from inception, you've 560% increased the value of your investment. And so it's a great investment. I love it. I love the closed-end fund things. They get very exciting when there's corporate actions and when there's activism, so to speak. Geoff is not shy of that, we all know, but usually based on a very -- well, always actually based on a very strong rationale and motive. I don't know whether that answers all your question, but I hope so.

And actually just to give you a bit of history, and I don't know, does it make us less independent I will ask maybe won't ask is James gave me some research about 35 years ago or maybe 33 about closed-end funds. And it was a bit of research that Morgan Stanley had written. And it looked at the mutual funds over there, and they call them closed-end funds against the closed-end funds and looked at them over a 50-year period and the closed-end funds that outperformed the mutual funds over that period of time. And that was before I set up my funds management business. And one of the reasons why I ended up going into creating vehicles of closed-end funds was because of that research. And what that research showed is that a closed-end pool of capital outperforms an open-ended pool of capital over time. And why does that happen is because an open -- the problem with an open-ended pool of capital, you tend to get all the money flows in at the top of the market because that's when most people want to invest. And then the money tends to flow out when the market falls. So the most money tends to flow out at the bottom of the market. So you as a fund manager, you're getting money to buy expensive companies. And then when the market is falling, you're forced to sell stocks that are cheap. And they showed that a closed-end pool of capital outperformed by -- it was actually 2% to 2.5%. And James gave me that piece of research and he asked for it back and I never gave it back to him. And we've never been able to find the receipts.

It was Merrill Lynch actually.

I was Merrill, I thought it was Morgan Stanley anyway, Anyway, so that was just a bit of history. Okay. To the proxies, this is how the shareholders have voted. The proxies are on the screen. We've gone through the questions. Are any additional questions for James? No. Any online? No. Any online, Linda? No. Okay. If you are a shareholder or proxy holder to vote online, could you please complete your vote for resolution 3. [Voting]

Okay. So we've now addressed all the resolutions. There was -- now what was the -- there was a question on Linda?

Does the Chairman know or is the Board considering to have the dividends fully franked? Does the Chairman or the Board have a date for if or when the dividend will be fully franked?

Yes. Actually, why don't I refer to our Chief Financial Officer, Jesse Hamilton on that. The answer is we actually don't know because I think -- well, I think that's a broad answer because there's a number of factors. Jesse, do you want to speak to that particularly?

Yes. There's no date specifically. It depends on a couple of factors. It's the franking we receive on the investment portfolio. It's the realized profits that we pay tax on. You don't pay tax on the unrealized profits within the portfolio performance. And then we do have some tax losses there, which we are recouping to the benefit of shareholders from prior years. So it's something we're monitoring closely, and we'll continue to update shareholders if that changes with the current position of the franking. Okay.

I've just got one more question, Geoff from [ Linda Zenip ]. Do you expect any setbacks over the next 12 months that could affect WAM's share price or expect it to continue increasing?

Yes and yes. Yes. Unfortunately, that's right. Unfortunately, the share price will be -- it tends to be a reflection of the performance of the underlying assets and the movement in the NTA. And we've seen a lot of volatility over the last few days. And we don't know whether this is taking a little bit of air out of the AI bubble or taking a lot of air out of the AI bubble and only time will tell. So what our goal is, is to keep managing that pool of capital to get the maximum return. And we've all been through periods where markets have fallen significantly. It's not I mean what we do know is markets go up and go down. And when they go down, it's very painful. To me, the bigger thing for us as fund managers is we know markets are going to fall. It's how quickly you make your money back because that's -- to me, that's the crux. And we've always tended to make our money back a lot quicker than the market has. So yes, unfortunately, I can't -- I've got no certainty about what the performance will be. We've just got a few more minutes, and I don't think we've got any other questions. But we've got Oscar -- I've got a couple more questions. Yes. Two questions. And do we want to bring Oscar up? Oscar, do you want to come -- we're going to ask Oscar some questions, too, please.

I was going to ask you a couple of questions. Firstly, Mr. Chairman, I note that in the report, the top 20 shareholders own approximately 81 million shares. They own approximately 7.3% of the company, and there'd be approximately 1.5 billion shares in the company. I also see on the screen that we had approximately 45 million, 50 million, whatever, I'm sorry, voting for our illustrious Board. In your opinion, does this show extreme confidence in the quality of the company or extreme indecision and latitude by the rest of the shareholders?

To me, it's a very good question. It's a really good question. My observation is when sort of -- when nothing contentious is happening, people are less inclined to focus on voting. When someone is trying to change the Board or something you tend to get -- you can easily get 70% to 80% of shareholders turn out the vote. So I wouldn't necessarily -- I don't think the Board will be arrogant enough to think it's because things are going well necessarily. I think we've always got to be on our toes. I think it's more the fact that at the moment, no one has to -- there's not a big decision to be made. Does that sort of semi-answer the question.

Yes. Thank you, Mr. Chairman. My second question is not a question. My second question is a congratulations. I hold here the document of your discussion paper last April for which you advocated a lot of money on and took to parliament and got with others the decision to get rid of unrealized taxes on unrealized capital gains, which was an absolutely brilliant piece of work on behalf of not only this company or on behalf of all shareholders, especially people in self-managed super funds like me. So on behalf of myself and in my opinion, everybody else in this room and should be every shareholder in Australia, I'd like to congratulate you on the hard work you put in to get that result.

Thank you, John. And look, thank you. It was a big team effort. And to me, like a lot of people played a significant part. And obviously, everyone at Wilson Asset Management, but various other players and other commentators. To me, it was incredible that it took so long for sanity to prevail, but it was it was quite amazing that it actually did. And yes, like to me, I didn't believe -- if you'd ask me today if it was still going on, would they change their mind? I actually spoke to someone in the morning of that worked for one of the political parties and I said, look, it's taken a while. What do you think the probability of it him changing his mind, he said Chairman he is definitely not going to change his mind half an hour later. Well, someone else obviously [indiscernible] for him. So yes, incredible result. And to me, it was just -- well, as you said, you've got it there and you read it how insane it was. John, everyone really appreciates that comment. Thank you. So any questions for Oscar about the market, the portfolio? Yes. Actually, do I -- before I -- has everyone voted -- have we voted on James? Yes. Why don't I declare the poll closed and formally charge Boardroom to count the votes. And now yes.

Oscar, just WAM Capital has expanded quite a bit since I first bought it, including taking over other funds. I was just wondering how you've had to adjust your approach to choosing stocks for a much bigger fund than you originally were handling. Bearing in mind, you're also doing a microcap fund as well. And whenever I see you, I always ask you for a tip, what do you think is the most promising investment you've got at the moment. So maybe you could do that as well.

What was the last one I gave you. Hopefully, it was all right.

[indiscernible]

Look, we are a big fund, and there's 4 of them, but I've got an amazing team behind me. There's 6 of us, and we've just employed a seventh. So the team does an incredible job. So it's not just me doing everything. It's quite the opposite. And Geoff always says you want to employ people that are smarter than you, and that's certainly the case in our team. Look, the fund is bigger. But like anything, you evolved. And I think since we launched the Microcap fund in 2017, we didn't know it at the time, but that is an amazing synergy for WAM Capital because a lot of our successful holdings that you see in WAM Capital came out of the Microcap fund, Generation Development Group, John's Lan Group back in the day. So they've all been tremendous contributors. So -- but yes, look, I mean, the fund is bigger. You can't hide from that, but we've got an amazing team. And hopefully, the last 3 years shows you that the performance has been very, very good. So very happy with how we're going. Stock pick. I like Navigator, NGI, so Navigator is a collection of equity interest in effectively hedge funds globally. It's led by a very good CEO. The business has fundamentally changed over the last few years. They've got a large company in the U.S. called Blue Owl, which does the exact same thing, but focuses on much larger hedge funds. Navigator, they own 50% of Navigator. Navigator is focused on the small ones that are too small for Blue Owl effectively. So they can leverage Blue Owl's infrastructure to grow and Navigator has got quite a lot -- it's got a very good balance sheet. We think there will be acquisitions. And in time, you'll start to see divestments of the successful hedge funds into Blue Owl and they can keep recycling capital. So it's trading on a very cheap valuation, reminds me of Pinnacle back in the day when it was growing. I think it's on a price earnings multiple of 12. Pinnacle today is on around 24. So we think that it can grow into quite a large company.

I'd be a bit worried that it's a safe investment because when I was leaving the AGM the other day, the lift went to the bottom of the well, and we were in there for half an hour waiting to see whether we're going to get out or not. So anyway, that's a strange coincidence that July recommend that.

Right. Any other questions for Oscar? Any questions online?

I've got one online, Geoff, from John Burrow. Are there any plans to raise more capital from existing share investors in the next year or 2?

Does he think we should? Can we ask him that? Can we type back and say, do you think we should? And what method should we use? I mean one of the risks and -- one of the gentlemen I was talking to about [indiscernible] is the -- so with WAM Capital is there's people -- depending on when you bought your WAM Capital shares, it was WAM Capital at one stage was trading at 32% premium. I think it got to 4 years ago. And it was around, say -- it was around $2.20. So you take off 32%, then you're down at around $1.90 or something like that. Now -- and then we're paying -- then the GFC came and a few things happened, but we kept paying a high dividend of $0.15, and then all of a sudden and you're paying your capital away. We're paying your capital back to you as a dividend effectively. And then the shareholders are saying, we'll hold it. I paid -- I bought it at $2.20 announced down here. We said, well, the assets -- we're managing the assets. You bought a car like a $100,000 car, you paid $132,000 and you're wondering why it's only worth $100,000 or maybe it's value, maybe it's $90,000 so yes, like to me, at Board level, we think, well, should we do an SPP or something like that. And because like I think WAM is trading at a premium at the moment, quite -- it's about a 15% premium. Should we do an SPP and just do it to shareholders who want to put a little bit of money and don't do a placement, just do an SPP and to take a little bit of heat out of the -- we don't want the premium. We like a bit of premium, but you don't want too much premium because then people are paying at a 15% or 20% premium, then they say, well, when it goes down to asset value, they say, well, we bought it there, and it's only worth that. So yes, you've got to look at NTA, that's what you -- obviously, you want to try to buy things at NTA or a discount. And when the premiums then your question whether you want to keep them or not? Sorry, what was the answer?

He said, I would like it if you did as I would like to invest some more, but only if you use it productively. What I'm saying is sometimes it seems the market value is above the NTA.

Correct. Yes. And that sort of -- that all makes sense. Okay. Any other questions? Okay. So the results of today's AGM will be released to the market as soon as they are determined, which will be later today. There's no other formal business for the meeting. I declare the AGM closed. And I'd like to thank all shareholders. We greatly appreciate your support. Thank you very much.