WAM Global Limited (WGB.XA) Earnings Call Transcript & Summary

[Audio Gap] 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. Thank you all for joining us and to continue to support WAM Global. Before we begin, a disclaimer is displayed for you -- on the screen for you to read. I'm Geoff Wilson, Chairman of the Board of Directors. Joining me today in person is my fellow Board member, Gabrielle Trainor. Caesar -- online, currently in New York, where he resides, is Caesar Bryan. And unfortunately, Kate Thorley is an apology today. Acting in the capacity of moderator is Joint Company Secretary and Wilson Asset Management Finance Manager, Linda, who will assist in addressing any questions received during the meeting. Richard King, a representative from our auditor Pitcher Partners, is also with us and will be available to address any questions related to the company's financial statement. It is just after 8:30 and a quorum is present. So therefore, I declare the meeting open. The Notice of Meeting has been circulated to shareholders, and in the absence of any objections, I'll be proceeding on the basis that the notice has been taken as read. I encourage you to read the Chairman's Address in detail, which has been announced to the ASX. Shareholders who have logged into the webcast with your username and password will have the opportunity to submit questions online and ask audio questions as well as vote on the resolutions. If you're joining us online, questions can be submitted at any time. Okay. 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, obviously, we'll use the old-fashioned method, please raise your hand and wait for the microphone to be brought to you. Our voting today will be conducted by way of a poll on all items of business. 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 voting open on all resolutions of business. You can vote in -- at any time during the proceedings until I declare the voting closed. I'll give you a clear prompt later in the meeting to warn you that voting is closing. Pleasingly, the share price discount to NTA has closed in the last financial year. WAM Global is now trading around NTA parity with the -- actually with the -- actually, at the moment, it is probably trading at a fraction of a premium to NTA. Okay. Where is the -- have we got the rest of the announcement to the ASX? Have we got that doc? Okay. I just wouldn't mind -- I think now I'm going to give you a bit of color about the last 12 months, which isn't here -- can someone find it for me? Or is it -- beautiful. Okay. Thank you. Unless I just haven't gone far enough into it. The -- yes. Let me just see -- no, we'll do this because, yes, the next part is the formal part. So in terms of WAM Global's investment performance, over the 12 months to the end of June 2025, you see the investment portfolio increased a little -- just a fraction under 20%, actually outperforming the MSCI, which rose 18.5% over that period. One of the very pleasing things I mentioned that the WAM Global was trading at a quite a sizable discount to NTA. Go back a year and a bit, it was trading, I think, close to 17%, 18% discount to NTA. And over the last period, with the consistent communication with shareholders, explaining the investment process and the consistent delivery of performance that the discount to NTA closed, which I mentioned a minute ago, it's actually now trading at a slight premium. In terms of dividend strategy, one of the good things about WAM Global, it's a -- for a global equities play, it is able to provide a -- has been able to provide a strong growing stream of fully franked dividends to shareholders, which we know that obviously, Australian shareholders getting a fully franked dividend is of -- can be a sizable benefit. In terms of the last 12 months, the dividend that was declared was $0.13-odd, which was providing a yield a little over 5% fully franked, which on a grossed-up basis, is nearly 7.5%. In terms of the dividend going forward, the plan will be to gently increase that dividend. And as the underlying assets continue to grow, so we can give shareholders a combination of income and capital growth. The -- yes, in terms of the outlook, I think it's -- we'll probably refer to that a little later in questions. We've got the investment team here. Yes, and particularly with the volatility in the last couple of days, I'm sure that will come up in question time. Now -- and as I said, please, for the full details of the Chairman's address, they've been announced to the ASX, and so you can read the additional comments there. We shall now conduct the formal part of the meeting. And there are three items of business for the AGM today as set out in the Notice of Meeting. Two items are to be voted on. The Notice of Meeting and Extraordinary 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 they will conduct our polls. I further note that Resolution 1 and 2 are subject to voting exclusions outlined in the Notice of Meeting. The Board recommends approval of Resolution 1 and 2. And as Chair, I'll be voting all open votes provided to me for Resolution 1. We will advise the ASX as soon as the results are determined, which will be a little later today. You may submit any questions or comments you have on the financial statement and report now. The first item of business is to receive and consider the financial statement, the directors' report and the auditor's report for the company for the year ended 30th of June 2025. I mentioned that we have our auditors here, represented by Richard King, to answer any specific questions. There's no resolutions on this matter. Do we have any questions in the room initially? Yes. Now today, we're going to -- we've decided to restrict questions for people that have more than the 300 shares. No, I'm just kidding, David. Good to see you, David. I understand you're not a shareholder -- if we can turn to mic on, but I understand you're not a shareholder and you're the corporate representative for Stephen Mayne. Is that correct?

Is the mic on? Great. Geoff, I'd be delighted to have a huge shareholding if the performance was better. [ Chris Mackay ] is here. I've had a very large shareholding in that for many years. So I'm delighted to invest where the returns are. But perhaps I can move to a couple of questions, Geoff.

But David, just -- so just for clarity for everyone, you're representing Stephen Mayne, as a corporate rep for Stephen Mayne, who has 220 shares in the company. Is that correct?

That's correct.

Perfect. Thank you.

Okay. Let's cut to the elephant in the room, Geoff. The performance. Our performance since inception is 10.1% compared to the MSCI World Australian performance, 13.2%, so that's a deficit of 3%. But if we take fees off, Geoff, you're 5% under the relative index that you can buy for about 10 points. My first question...

Anyway, let's go through the information, then I'll -- we'll go through...

My first question is to the auditors. You stated in the annual report that you have $46 million, Geoff, under the threshold for getting performance fees. If the auditors could just clarify, does the formula for performance fees take into account that the index actually doesn't generate any uplift for franking credits? And secondly, is the formula for performance fees, Geoff and the auditor, based on the Wilson pre-fees performance compared to the index, which doesn't have fees associated?

Yes, I'll let Richard -- yes, thank you.

So on the first point regarding the franking, that's excluded in the performance fee, is that what you...

How do you get then $45 million when the deficit is effectively 5% since inception?

Well...

Just can we -- why don't we just get a microphone. Thanks.

So as the fund has grown, so you'll remember there was a merger with TGG at a point in time. So some of that underperformance relates to a lower capital base. Some of it relates to a higher capital base. So it won't be a like-for-like, you can just take that figure x current FUM. And sorry, on the fees, confirming it's all after fees...

[ Hannah, ] can you give one to David. Thanks.

Thanks. I might take it off-line, Geoff, because I appreciate you've got a short period of time today. So...

No, no that's all right.

But look, I had three questions. So the second one is that I'm just interested, Geoff, that you...

Well, can we actually just finish with the first question. It was about performance because similar to, say, WAM Capital, which is another listed investment company we manage, and it tends to invest in undervalued growth companies and focused on mid- and small-cap undervalued growth companies, but it has its performance index as the [ all odds. ] And the reason we did that was because when we set up WAM Capital and similar when we set up WAM Global, we were giving our shareholders an opportunity to invest in these, in either Australian equities. So we said, hey, look, we'll hold ourselves to the [ all odds ] or we said, hey, with this company, our DNA is investing in undervalued growth companies with a catalyst, when we can -- when the company can revalue. But our preference tends to be we look in -- we don't invest in all the large-cap companies. We're looking for smaller undervalued growth companies. So in terms of maybe the MSCI is the wrong index for this. But look, but that's what we -- when we're raising the money, people wanted exposure to global equities, we said we're going to invest in this certain way, and we'll put that in as the index. But we're not going to change the index for the performance fee, it is what it is. Why don't I get -- we're fortunate enough to have -- Catriona is now -- after being based in New York for the last few years, we've still got a couple of people based in New York, Catriona is back in Australia, and she is with us here this morning. So...

Can I just [indiscernible] for Catriona?

About performance?

Yes, yes.

Okay.

Look, Catriona, in the annual report, you specify that you've got a distinctive investment process, which to me is a little bit [indiscernible] you talk about two things, which is why you're distinctive. Research-driven process focused on identifying underlying international growth companies. To me, that's a little bit strange because you're really only in a very small number of the mega global growth companies. The second criteria you talked about in the annual report is that you have a market-driven process that takes advantage of mispricing opportunities. Look, it's easy to say those things. But at the end of the day, post fees, you're 5% under since inception. But maybe you can clarify on the investment process and why you have avoided -- to a large extent, you've only got holdings in two of the big American techs out of 50 holdings, why you have avoided them, which has obviously hurt performance.

Just to take a step back, it's undervalued. We're buying undervalued growth companies with a catalyst. That's how we've always done it. But yes, let me pass on Catriona.

Yes. And the reference to research-driven and market-driven carries on from the WAM Capital process. So -- and if you look at WAM Research and WAM Active, they're exactly the same process in Australia. So those -- that investment process is the same that has been at Wilson Asset Management for the last 28 years. So that's what you're referring to in terms of that research-driven and market-driven. So that hasn't changed for a very long time. In terms of -- as Geoff said, where we invest, we can hunt around the world for ideas where we find them. And -- but as I said, we're looking for undervalued growth companies. We tend towards that small mid-cap end of the market. Absolutely, that has not been the place where returns have come from in the last about 8, 9 years of the fund. So the returns have very much been generated from -- if you look at the index composition and where returns have come from, it's come from a very small subset of very large U.S. tech companies. And the only one of those that's had a significant contribution to the portfolio has been Google, which Nick can give more context around that, but we bought in on the idea that it was considered an AI loser, and we took the other side of that bet. So we will go into the large end of the market if it fits our process, but we're not changing how we run the money just because a particular set of stocks are doing incredibly well. We have to believe in the fundamentals of the company, it needs to fit our process before we'll add them to the portfolio. If you wanted to generate returns from the Mag 7, you very much can buy an index fund that has an enormous overweight positioning towards a very small subset of those stocks. Yes.

Yes. Thank you for the question. I think additionally, it's worth remembering that -- so we are about 2x the size of the SMID-cap exposure when compared to the MSCI world, which itself is very large-cap weighted, as Catriona mentioned. And if you look at the returns of the MSCI World since inception, about 40% of them have come from those Mag 7 stocks. That's a remarkable amount of concentration in the large end of the market. We do hold growth companies. So whether they're large or small, we certainly hold growth undervalued growth.

Okay. Look, I'm conscious, Geoff, you've only allowed half an hour of the meeting, so I'll only ask two questions today. I've got a lot more, but it will be limited to two. My second one, Geoff, is that you have recently severely criticized Pengana International. In fact, you moved that criticism to putting forward a slate of directors to remove the Pengana directors from the Board and you succeeded. But the basis on that ambush was that you criticized them quite legitimately, Geoff, because their performance was fairly poor. I'm just wondering about the consistency here that you've attacked Pengana, you have removed their directors from the Board, you now control the Board of Pengana, albeit they still have a management contract for another 4 years. I'm just interested in the consistency here, Geoff, as to why attack Pengana and change the Board when your own global company has similarly weak investment performance since inception.

Thanks, David, for the question. This is WAM Global's AGM. So I'm not discussing Pengana. And in terms of the comments you made, I didn't make in terms of severely criticizing them. But thank you for the second question.

They were made by WAR, and WAR is a holder here as well, Geoff. So I think you're being a little...

We'll wait for the WAR AGM, and we can address it then...

I think you're being a little bit disingenuous there, Geoff, but anyway, question stands.

And thanks, David. Please stick around for the WAR AGM. Thank you. Perfect. Any more questions? Okay. Perfect. What are we up to now? So was there anything online? Okay. I'm surprised, Stephen is not online, which I'm disappointed with. Okay. So no further questions. We come to the items of business for which a vote is required. Resolution 1 relates to the adoption of the remuneration report. You may submit any questions or comments you have on Resolution 1 now. The proxies received are on the screen. For the open proxies, which have been granted to Chair, I'll be voting in favor of the resolutions. Any questions in the room? No. Do we have any questions online? No. Okay. As there's no questions or comments, I now put the motion that the resolution be approved as set out in the notice of meeting. If you are a shareholder or proxy holder and eligible to vote online, could you please complete your vote for Resolution 1? [Voting]

Vote Resolution 1. Perfect. We'll get the Boardroom guys onto that. Thank you.

All right. Can I [indiscernible] I can't vote online. Someone is having trouble voting online.

Thanks. Everyone else able to vote with the machine? Yes. Technology is working now, perfect. Resolution 2 relates to the reelection of myself as a director. And as such, I will call on my fellow Director, Gabrielle Trainor, to handle this resolution. Thanks, Gab.

Thank you. Thanks very much, Geoff, and welcome shareholders, both online and in the room. Geoff, I'm wondering whether you'd like to make some remarks in support of your reelection as director for WAM Global?

Yes. Look, thank you very much, Gab. Obviously, I've enjoyed being involved with WAM Global. I'm excited in terms of what we've achieved to date at WAM Global and in terms of what we could achieve going forward. I think when WAM Global was created, it was one of the smaller global LICs. Since then, a number of global players have left the LIC market, and as Catriona mentioned earlier, WAM Global merged with Templeton Global and doubled in size and now is obviously by the market -- even David doesn't fully understand how the money has been invested in terms of buying those undervalued growth companies, but the market appreciates that and has now moved the share price to above the value of the assets. And I'm very excited about the next 5, 10 years of WAM Global and what WAM Global could end up being. So I'd very much like to stay on the Board to be -- to go along for that journey. Thank you.

Thanks, Geoff. So I might ask shareholders if they wish to submit any questions or comments on Resolution 2, please do so now. Yes, David.

Look, Geoff, you correctly distinguished between WAR and WAM Global before, I accept that. But you do wear two hats, Geoff, you are a director of the company, and you are also the sole shareholder of the management company. I just -- my question is what -- at what stage are you as a director, wearing a director's hat, going to ask the manager to change its strategy so that the after fees 5% underperformance since inception can be rectified? I'm asking you the question in your capacity as a director. I appreciate you're on both sides of the fence. But how are you going to help the manager lift its performance?

The -- so to answer that, just let's take a step back. So Wilson Asset Management has been going for 28-odd years. We have a very specific way of investing money. We buy undervalued growth companies when we can see a catalyst is going to change the valuation. And the companies have to write. So a number of people here today have been shareholders with us over the period. And there are times where you outperform and there are times when you underperform. When you're buying undervalued growth companies, we have a propensity to look for smaller companies because we're -- because our investment process, which looks at management, writes management, writes earnings growth, has a valuation metric and also writes industry and position in the industry. If a company doesn't write and [indiscernible] would not write -- if a company doesn't write, we don't buy it. Commonwealth Bank wouldn't write. So it doesn't matter if these companies can double and triple and quadruple, we won't own them. So if that's what you want exposure to then you've got to go somewhere else and invest with those. Now we've always stuck to our knitting and what -- it's been a successful -- it's been successful for shareholders. And David, you don't own any shares, the person you're representing owns hardly any shares. And we appreciate you coming here because it creates entertainment for everyone, but it actually doesn't achieve much. So yes, we will continue to do what we do. You can come every year. You can represent Stephen Mayne every year. But to me, it's -- it won't change us from doing what we're doing.

Geoff, I repeat that if your performance was good, I would own a lot of shares. I own a lot of shares in high-performing LICs, but I'm not a shareholder because your performance is poor. Yes, there are ups and downs, Geoff, but I'm going back to inception. You are 5% under the index after fees. Now that's a huge deficit. You're 3% under, but throw in the fees and the costs, you're around about 5% under, Geoff. I'm asking you as a director, wearing a director's hat, not a Wilson manager's hat, at what point are you going to lose confidence in the manager because it is 5% under since inception per annum, which is a huge deficit, Geoff.

Your numbers are wrong, David, and so I haven't lost confidence. Thanks very much.

They're not wrong, Geoff, they're right.

Thank you, David. Any other questions in the room or online? Any questions online, Linda? All right. We -- the proxies received are on the screen now. And for the open proxies, which have been granted to the Chair, and I am the Chair for this item of business, I'll be voting in favor of the resolution. So if there are no further questions or comments, I put the motion that Geoff Wilson be reelected as set out in the Notice of Meeting. And if you're a shareholder or proxy holder and eligible vote online, could you now please complete your vote for Resolution 2. [Voting]

So thank you. We have now addressed the two resolutions, and I declare the poll closed and formally charge Boardroom to count the votes. Back to you, Geoff. There you go.

Thanks. Yes, exactly. Just thank you. Okay. So we've done Resolution 2. Okay. Now just before we close the AGM. I think it's very important for the people that are here to actually hear from the investment managers because David's asked his specific questions. We've tried to answer them as fully as we can, but he doesn't fully understand how we invest the money. So if I can call on Catriona and Nick, maybe why don't you come up here? And Catriona, can you just -- can you take us through how you invest the money, shareholders' money, so the people that have come here, instead of having the aggression or the negative vibe that David has been putting out, understand actually how the money is working on their behalf. Thanks.

Thanks. As Geoff said, we do use at the Wilson Asset Management investment process, which you rightly point out actually has underperformed the index on the large-cap side. On the small-mid index, we've actually outperformed. But what's actually happening even in that in that small mid-cap end of the market right now, is there's some outrageous share price moves in companies that have no revenues, no profits, and that's not where we're going to invest. So likely we'll be behind that small mid-cap index right now, and we are behind that small mid-cap index when you look at from first of July because we are not going to invest in companies that are trading on $20 billion valuations with not $1 of revenue. That is not where we invest. We look for companies that have high-quality management teams, strong industry positions, solid and sustainable earnings growth, valuation support and then a catalyst. That is our process. And when that -- when the market is running hot on companies that are outside of that mandate, we're not going to chase it. And we think that's a responsible way to invest our shareholders' money. And when we look at how the fund has done over time, we've actually generated very solid returns with a risk-based approach that does factor in all of those fundamentals rather than just chasing speculation or being highly concentrated in a very small number of names. So we've offered a diversified portfolio, a very high, strong dividend yield and capital preservation. So absolutely, right now, there's some interesting dynamics when you look across the whole market. It's -- there's -- the one factor is that there is a very -- those returns are being generated at the high at the top end by a very small number of names and at the -- right now in small mids, it's highly speculative. So we have a process. We are not going to change it. As Geoff said, it's been 28 years of following this process, and we think that it delivers -- and that's how -- we haven't changed it since we started the fund. Our shareholders knew that that's the process that we're going to follow. And so yes, that's where we are today.

I'm tempted to say nothing to add because that was pretty much what I would want to say. The only addition I would mention is if you're suggesting a change in approach when small to mid-cap stocks are at the most significant discounts to large-cap companies, that they've been at least since '99, it doesn't feel like a prudent course of action to move away from companies that are performing well, that are growing earnings well, that are trading at very attractive valuations, simply because large cap has outperformed for -- since the inception. So I think it's interesting. I kind of question the merits of the thought, but nothing to add apart from that.

And do we have any questions from people that are here that are actually shareholders in the company rather than people that are representing Stephen Mayne with his 220-odd shares? And well, you can decide which one is the truth. That's what -- that's why I thought it's important to listen to the investment people. To me, I'd prefer to put my money with them. Yes, Bill. Thank you.

I think one of the things I'm trying to differentiate between LICs and index funds, and there are a lot of people who are very pro index funds, and I have some index funds myself. But I think one of the things is that what WAM Global provides is consistent income. And for me, that's very important, relying on that. The certainty of future dividends because of the profit reserve, whereas with the index funds, no idea what income I'm going to get next year.

Yes. That's a very fair point. Because we have over 6 years of dividends in the profit reserve. So thank you for highlighting that, Bill.

Any other questions from shareholders? Linda, are there any online questions from shareholders? No. Look, on that positive note, after we've taken the negative energy out of the room from David. Yes, look, thank you all for coming -- no, no, you can't. I'm just -- I'm closing the meeting. Thank you very much. Thanks for coming. Thank you. Thank you.