Good morning, ladies and gentlemen. Welcome to the 34th Annual General Meeting of Djerriwarrh Investments Limited. My name is John Paterson, Chairman of your company. The Company Secretary has confirmed that a quorum is present online, and I declare the meeting open. I would like to begin by acknowledging the traditional owners and custodians from all the lands we're gathered on today and pay my respect to their elders, both past, present, and emerging. Due to the ongoing coronavirus pandemic, my fellow Non-Executive Directors, Bruce Brook, Kathryn Fagg, Graham Goldsmith, Alice Williams, and Karen Wood are joining by video. Robert Edgar is an apology. I'm joined by our Managing Director, Mark Freeman, our Company Secretary, ` our Chief Financial Officer, Andrew Porter, our General Manager of Business Development and Investor Relations, Geoff Driver, and Portfolio Manager, Brett McNeill, and Investment Analyst, Olga Kosciuczyk.
All of whom are practicing responsible physical distancing today. I'll also take this opportunity to introduce Nadia Carlin, partner of the company's auditors, PricewaterhouseCoopers, who is attending via video and available to answer questions today on the audit and preparation and content of the auditor's report at the end of the presentation. Today's meeting is being held online via the Lumi platform and via teleconference. Today's presentation has been released to the ASX and made available on our website. Those of you who've joined the meeting just prior to the start would've seen a short video on how to vote and ask questions via the Lumi site. For those shareholders and proxy holders joining by telephone, you can indicate you would like to ask a question by pressing star one on your telephone keypad and wait for your name to be announced.
I remind shareholders that whilst questions can be submitted at any time, I'll not address them until the relevant time in the meeting. Please also note that your questions may be moderated or, if we receive multiple questions on one topic, amalgamated together. Voting today will be conducted by way of a poll on all items of business. I now declare voting open on all items of business. I'll give you a warning before I move to close voting. I can confirm that where undirected proxies have been given to me as Chairman, I'll vote them in line with the board's recommendations on each agenda item. Before we move to the business of the meeting, I would like to provide some additional comments. I would like to firstly comment on a couple of changes to our board.
Bob Edgar has chosen to retire and does so at the end of this AGM. During his time with the board, Bob has brought very broad business experience and knowledge across a range of industries, such as banking, retail property, and infrastructure, to name a few. That has assisted our discussions on particular industries and ASX-listed companies. This has been very valuable input for our investment team and board. We'd like to thank him for his contribution and wish him well. In August, Bruce Brook joined our board. You'll hear some words from him shortly when his election resolution comes up. He has experience across banking, mining, healthcare, explosives, and fertilizer industries and has had considerable board experience. We welcome him to the board. Djerriwarrh's performance has been strong over the last 18 months in both absolute terms and relative to the ASX 200 index.
In Fiscal 2020-2021, its total portfolio return, including franking credits, was 29.6% versus 29.1% for the index. It is very difficult to keep up with the index in such a strong market when you have, on average, just over 30% of the portfolio covered by call options. It has been a great credit to the investment team. I should also note that, in the last 48 hours, we've released our end of September NTA performance and portfolio release, as we normally do, and that outperformance in the index has been sustained in the September quarter, leading to 2% outperformance over the last 12 months, which is very pleasing. We're also pleased to provide a final dividend of 5.75%, up from 5.25% at the half year. The recent reporting period saw strong increases in dividends, in particular from the iron ore miners and from CBA.
We await with interest the final reports of the other three banks to see their dividend declarations. Although option income was strong in 2021, it is difficult to assess the likely outcome for this source of income in the current year at this early stage. It'll be very dependent on the level of market volatility through the year. Moving on to the business of the meeting, I'll take the notice of meeting as read. The first agenda item is the consideration of the financial statements and reports for the year- ended 30th of June 2021. We'll do this via a presentation, after which I'll ask shareholders to comment or to raise any questions, either about the presentation or the auditors if they have any questions about the audit. I'd like to thank shareholders who submitted questions before the meeting. Where possible, we have addressed these in the following presentation.
I'll now pass you to our Managing Director, Mark Freeman, to start the presentation.
Thanks, John. Good morning to everyone. Unfortunately, again, we are unable to have this AGM live. We really enjoy the interaction with our shareholders. We're hopeful that next year we'll be able to do that. Just starting with the formal presentation on Slide four. As usual, there's a disclaimer to say we're here to talk about the business. We're not here to give any advice. Just moving on to Slide five, just the agenda. I'll give a bit of an overview. I'll pass on to our CFO, Andrew Porter, to give the financial year-end summary. Brett and Olga will talk about the markets and portfolios. Finally, Brett will give a bit of an outlook. Just moving forward onto Slide seven. Just want to reiterate what we're about at Djerriwarrh.
Djerri, as we call it, is one of the largest income-focused LICs on the market and was first listed in 1989. Shareholders get the benefit of full transparency associated with being a listed investment company, as well as the high governance standards delivered by an Independent Board of Directors. Importantly, the Djerriwarrh shareholders own the management rights to the company, so there's no fee leakage to third parties, and there are also no performance fees. Djerri is part of the broader group of LICs, which also includes the Australian Foundation Investment Company, AFIC, AMCIL, and Mirrabooka, and this supports a broader research approach and the scale of operations. If we move to the next slide, part of that is access to a quite significant and experienced investment team.
All their pictures are shown here, and we've highlighted in the top left-hand corner, Brett and Olga, who'll be speaking this morning. Moving on to Slide nine, the objectives of Djerri. Djerri primarily seeks to provide an enhanced level of franked income that is higher than what is available from the market, that being the S&P/ASX 200, and to deliver that at a low cost to shareholders and, as I stated, with no performance fees. Djerri aims to provide shareholders with attractive investment returns through that stream of fully franked dividends and also growth in the capital base. Moving on to Slide 10. How do we achieve these objectives? Well, our focus is on investing in high-quality companies. We want those companies to be able to grow their dividends over the long- term, and we aim to buy them at a reasonable price.
How we assess quality? Well, we do that by looking at a range of factors, which include the industry structure, competitive advantage, the quality of management, balance sheet strength and cash flow, and ESG factors. We construct a portfolio to deliver the right mix of income and growth, we seek to generate additional income from our option writing activities. Overall, we manage risk by maintaining a diversified portfolio of high-quality companies and managing the option positions on a daily basis. When we look at the chart on the right, the outcomes of that, as John had pointed out, over the last year or over 18 months, the performance has been really pleasing. For those that have been listening to these updates, we did do a bit of adjustment in the coverage or call option coverage we had on the portfolio.
We felt it was getting too high and restricting our capital growth. Our dividend streams were quite good. The cost of that was we did have to slightly reduce the dividend. The outcome is much better capital growth, and we think the balance is much better at this point and the outcomes are coming through. Over the longer- term, we are a little bit behind the index. The call option coverage does cap our upside when markets are strong. The benefits to shareholders is they've been receiving most of the returns through fully franked dividends. In that regard, the franking credits we supply to our shareholders are a very important part of the total return. Moving on to the next slide.
The outcomes over the past 12 months then, as you can see, even though we had reduced our dividend previously, we are still producing a yield that is comfortably above the index when you include franking credits. It still is an attractive enhanced yield. However, with the lower coverage, we are getting much better growth in NTA, and that's picked up on the chart to the right, which shows how the NTA has been increasing over the last 12 months. We are hitting our objectives. Just moving to the last slide from me. We always like to show this slide. This is showing how the share price is compared to the stated NTA. You can see right at the end on the right, we're actually trading at quite a substantial discount to the fair value or the NTA on the market.
As you can see, historically, the stock did spend a lot of time trading at a premium. We do get some feedback to say, "Well, look, the share price has come off over the last few years." Part of the function of that is the share price moving from a premium to a discount. We cannot and we do not control the share price. That's a function of the market, but we just wanted to highlight that. As we sit here today, the share price is at quite a substantial discount to the NTA. With that, I'll pass over to Andrew Porter, our CFO, to talk through the financial year in summary.
Thank you, Mark. Good morning, ladies and gentlemen. As ever, we show here two profit figures. The first one is the statutory profit, the one that we have to show for accounting purposes. This includes any unrealized gains or losses on the options that we have written that are still open or in place at the end of the financial year. We don't know at the end of the year whether we will actually have made any money out of these particular options, we don't use this figure when the board decides on the dividend level. We use the operating profit figure, which is the next one, the AUD 31.3 million figure. This says that it was up 11.5% on the year, which some shareholders may query, asking why the dividend was not up by as much.
I'll come on to that in the next slide, as that figure includes something else that was an accounting necessity. The final dividend was up on the interim dividend, as Mark and John have both pointed out, overall, was down for the year. Again, I'll come on to that in a moment. We've looked at the yield already, have also looked at updated portfolio return figures. I just want to quickly mention the MER, or management expense ratio. This is the costs of running the company. It is the total amount of costs divided by the portfolio amount. What that means is that for every AUD 100 invested, it costs AUD 0.45 to run Djerri.
As Mark has pointed out, there are no outperformance fees paid to an external management company, just the cost of running Djerri, including listing fees, audit fees, shareholder communications, et cetera, as well as salaries. We think that compares very favorably to similar products on the market. Turning to the next slide, and this will hopefully illustrate what we mean by 2021 being a volatile year. The first thing to note is that we have removed the AUD 6.3 million of income that we had to account for as a result of the Endeavour Group demerger from Woolworths. This was not paid in cash, and there was no franking credits attached to it. It was an accounting adjustment, and therefore the board exclude it when looking at what the underlying real profit was to determine the dividend.
Excluding this figure, the operating result was down 11% or 13% per share. It is this figure of AUD 0.109 per share that is the relevant one when the board looks at what the dividend should be. We also had no realized gains to draw upon to pay the dividend, as has been the case in some prior years. We do have reserves of profit and franking credits to draw upon if we have another dip in income. Dividend income itself was down 24%, which is probably not a surprise to many. The CBA dividend cut was a large part of this. When John was talking about the CBA dividend going up, he was talking about since the end of the financial year. CBA was the last bank to cut its dividend.
Also holdings such as Sydney Airport did not pay a dividend, and companies such as Woodside, Oil Search, Alumina and Ramsay Health also cut. Although Ramsay, for instance, paid a bigger dividend than normal since the financial year-end to help make up for it. Conversely, the volatility really helped the option premium income. Volatility is a measure of how much and how quickly a stock price goes up and down, and it's a key input into option pricing because the chances of somebody being able to exercise that option because the price will suddenly change is much higher. This is one of the ingredients that the team look at when managing the options. For instance, when the market suffers a sudden fall, it is easier to close out those options and make a profit.
Suffice it to say that the option result was pleasingly up 58%, even as the dividends that we received fell. As the Chairman has pointed out, it can work the other way, so that option premium may be less as dividends increase. Djerriwarrh is the sum of different parts, Brett and Olga will look at this later on. The option income and the fall in interest costs that we had to pay, that is included in the finance and admin costs line, alleviated the dividend fall, could not make up for all of it. However, it has helped to maintain that all important yield that we looked at earlier. That's it for me. Over to you, Brett.
Thanks, Andrew, and good morning to everyone. Turning now to the market and portfolio update part of the presentation. In this section, Olga and I will give some extra detail on the two key items for Djerriwarrh's profitability: dividend income and option income. We'll illustrate some of the strategies that we use to produce Djerriwarrh's enhanced yield. We will then give an overview of the current portfolio, including recent changes to the companies held in the investment portfolio. Slides 17 and 18 focus on dividend levels across the Australian share market. We aim here to give some more detail on the dividends paid by a selection of companies in recent years, as well as an indication of the outlook.
To do this, we analyzed a selection of companies across the market, which all happen to be stocks currently owned in the Djerriwarrh portfolio, by looking at what dividends these companies have paid to shareholders over the last three years, being financial years 2019, 2020 and 2021, as well as the current market forecast for dividends for the current financial year, being financial year 2022. Note that the dividends detailed on slides 17 and 18 are the actual dividends paid by these listed companies, as distinct from the dividends received by Djerriwarrh. The financial years presented here refer to the dividend payment date, and hence they line up with Djerriwarrh's financial reporting years. The first group of stocks analyzed in the left-hand chart of Slide 17 are the major banks, being ANZ, Commonwealth Bank, NAB and Westpac.
We can see that combined, the Big Four banks paid out to shareholders a total of AUD 24 billion of dividends in financial year 2019. This fell significantly to AUD 16 billion in financial year 2020. Then fell further to AUD 14 billion in financial year 2021 as a result of lower profits and lower dividend payout ratios. As we can see, current market expectations, which are the average of market sell side analysts, are for a strong rebound in bank dividends for financial year 2022 to just shy of AUD 20 billion. This is driven by an increase from each of the Big Four banks. This is based on a return to more normalized profit levels as well as dividend payout ratios around 70%, which we think are sustainable.
Turning to large cap resources, we can see in the right-hand chart of Slide 17, that dividend payments from BHP and Rio Tinto have been largely flat over the last three financial years, before a huge jump expected in financial year 2022, largely as a result of higher iron ore prices. This looks great, there is a lot of uncertainty with these forecasts. Commodity prices are volatile, we have certainly seen that in the last month with the spot price of iron ore effectively halving. While the financial year 2022 estimated dividends from BHP and Rio should still be solid, especially given half of this amount has already been paid, at current iron ore prices, we would expect future dividends, i.e. from financial year 2023 onwards from BHP and Rio, to be lower than the FY 2022 estimate shown here.
Slide 18 considers a selection of industrial stocks across different sectors grouped into large caps and small caps. Starting with the large cap industrial stocks on the left-hand chart of Slide 18. This group of companies have delivered steady dividends over the last three years, with the trend actually better than what appears on the chart, given the financial year 2019 dividend from Wesfarmers was boosted by a special dividend paid in that year. Adjusting for this one-off item, dividends from this group of companies have been very resilient in recent years, with modest growth expected in financial year 2022. The main company in this group yet to recover from the pandemic is Transurban, with its profitability and dividend levels reduced by lower traffic levels caused by the Melbourne and Sydney lockdowns.
In terms of the small cap industrials, this group of companies have delivered terrific dividend payments, as we can see on the right-hand chart of Slide 18. Dividends here were resilient during the pandemic-affected years of financial years 2020 and 2021, with solid growth expected for financial year 2022 from each of these five high quality companies. Hopefully, this discussion has provided some more detail on dividend performance from these selected companies across the Australian share market, where we have recently seen large cuts to bank dividends, but resilient dividends elsewhere. We can see a much more positive dividend outlook across the board for the current financial year 2022. With that, I'll now pass to Olga, who will discuss our option strategies, including our option coverage levels and insights on how we generate enhanced yield from a number of our portfolio holdings.
Thank you, Brett, and good morning, everyone. On slide 19, we show the performance of the market since the beginning of the financial year 2021 to date, overlaid with the top-down view of our portfolio's option coverage. We manage our call option positions daily based on our view of the company's quality and valuation, and also in response to market conditions. The market, as defined here by our benchmark, the S&P/ASX 200 Price Index, has been very strong during this period, being up 27%. However, between November 2020 and March 2021, the market was largely flat. We used this to our advantage and closed out a number of call options to lock in profits. To preserve potential capital growth, we kept our coverage low at around 27%. Then in the period between June and July, following a solid rise in the market, we increased our coverage to 39%.
This was mostly driven by increased coverage in resources companies and banks. Moving to Slide 20. On Slide 20, we show how writing options translates to enhanced yield. By writing call and put options against our holdings, we earn additional income, which enhances the dividend yield we can distribute to our shareholders. This is our primary investment objective and a unique benefit of an investment in Djerriwarrh. It is important to note that the key consideration for us when we write options is the trade-off between short-term income and long-term capital growth. In the table on Slide 20, we show the benefit of writing options against four companies in different sectors: Coles, Amcor, NAB, and Ramsay Health Care. In each case, our option writing generated an income yield that enhanced the dividend yield produced by each company. Using Ramsay Health Care as an example.
Ramsay was impacted by COVID-19 as elective surgeries were deferred, which impacted their earnings and subsequently, the dividends we received from the company in FY 2021. By writing call options, we enhanced the yield from 0.7%- 5.1%, and it is worth noting we did so without sacrificing capital growth, as we were not exercised during the year. That means our portfolio is well-positioned for when Ramsay's earnings and dividends recover. Moving to Slide 21. On Slide 21, we show the enhanced yield that we achieved on the four infrastructure stocks that we own in the portfolio. These companies are usually meaningful contributors to our dividend yield. However, the impact of the pandemic meant that both Sydney Airport and Auckland Airport did not pay a dividend, and Transurban and Atlas Arteria cut their dividends.
By writing options, we were able to generate income from the airports, and in the case of toll road companies, we enhanced the reduced dividend yield to very attractive levels. Hopefully, these two slides provide some insights as to how we achieve our enhanced yield, which is a unique benefit of an investment in Djerriwarrh. I will now pass back to Brett.
Thanks, Olga. Moving now to our portfolio update. Slide 22 gives a snapshot of some of our major recent transactions. The left-hand side are the sales, which in Djerriwarrh occur through active selling as well as via option exercises. In terms of the active sales, we've reduced our position in Brambles and Alumina, and have exited our entire holdings in Orica and APA Group. Option exercises in Macquarie Group, Carsales, and Telstra have led to reduced holdings for now in these companies, which we may look to replace down the track. The right-hand side shows the key purchases. We've recently added four new companies to Djerriwarrh's portfolio. PEXA, which is a digital property settlements company that we invested in through its recent IPO. PEXA is the market leader in Australia with high profit margins and further growth potential from offshore markets like the U.K.
JB Hi-Fi, a high-quality retailer whose share price has recently sold off, meaning we could add this company to our portfolio at a share price that offers an attractive, fully franked dividend yield. SCA Property Group, a property trust that owns neighborhood shopping centers. The property portfolio is high quality, with the majority of its rent coming from Coles and Woolworths. It has an internal management structure with no fee leakage, which we prefer from a governance perspective, and it has a solid balance sheet and an attractive dividend yield. Cochlear, a global leader in hearing solutions. Cochlear is an incredible company in terms of its market-leading cochlear implant products and the impact these have had on people's lives. Its track record is excellent in terms of delivering returns for shareholders, and we think it is a great addition to the Djerriwarrh portfolio.
We've also been adding to a number of our existing holdings. Investing more in companies such as Wesfarmers, Westpac, BHP, Coles, and Transurban has enhanced the dividend yield of our portfolio, with each of these companies able to be bought at attractive prices on the back of recent share price weakness. We are confident that the overall impact of the transactions listed here on Slide 22 is a higher level of quality across our portfolio and a better mix of income and growth. As we've stated on Slide 23, this is essentially the key focus for Djerriwarrh, constructing a diversified portfolio of high-quality companies with the appropriate balance of income and growth so that we can deliver on our enhanced yield objective over the long- term. Slide 23 gives an overview of some of the key holdings in our current portfolio.
We own a good mix of large companies that are in the portfolio for their above-average dividend yield and also their solid long-term growth prospects. This includes Transurban, Mirvac, Westpac, JB Hi-Fi, Coles, and BHP. We also own a number of large companies that have a below-average dividend yield but that offer excellent long-term growth prospects. These companies include CSL, Mainfreight, ASX, Woolworths, Carsales, ResMed, and Goodman Group. We also have a place in the portfolio for smaller companies that have the potential for long-term growth. Note that these companies occupy a smaller portion of the portfolio than those in the above two categories. Key holdings in this space include financial services company Equity Trustees, independent investment platform provider Netwealth, online furniture retailer Temple & Webster Insurance software specialist FINEOS, four-wheel drive accessories company ARB, digital property settlements company PEXA, and the investment management business Pinnacle.
This hopefully gives shareholders some insight into some of the key holdings in our portfolio, which underpin the income and growth for Djerriwarrh. Finishing the presentation with the outlook section. On Slide 25, we've listed some of the main issues and topics for the equity market. These key insights and observation from the recent company reporting season are based on our analysis of listed company financial results, as well as our meetings with the management teams and often boards of these companies. We note that overall balance sheets are strong, with a number of companies now in a net cash position. Dividend payments were higher than market expectations in several cases. Digital and data strategies were highlighted by many companies trying to take advantage of trends, such as the growth in e-commerce that has been accelerated by the pandemic.
In terms of the key equity market influences, the market has definitely had a great run over the last 18 months, leaving valuations today at high levels in an absolute sense, but reasonable when compared to low interest rates. Takeover activity has also supported share prices, with companies such as Sydney Airport and Spark Infrastructure receiving takeover bids recently. Finally, inflation levels, commodity prices, and the pace of the reopening of economies will be large influences on company profits in the short- term, which naturally will flow through to Djerriwarrh's two key revenue items being dividend income and option income. Irrespective of these short-term factors, we believe that the current portfolio settings will enable Djerriwarrh to achieve its long-term objectives. With that, I'll hand back to our chairman, John Paterson.
Thank you, Brett. We'll now deal with any questions on the financial statements and reports for the year- ended 30th of June 2021. Do we have any questions, Geoff?
Yes, we have some questions, John Paterson. Just before we do that, just to remind shareholders that if you want to ask a question on the phone, press star one on the phone. On the Lumi app, select the message tab on the Lumi app, which is the middle top of screen if you prefer to ask a question. John Paterson, we have a first question from Mr. Cannon, who asks, "How can the auditors claim to be independent of the organization that pays them?
Thank you for the question. To answer the question, I think it's worth making three points. Firstly, it's common practice in most advanced economies that the company pays the fees of the auditor. Furthermore, PwC has strict internal controls which cover their independence. Lastly, PwC provides an independence declaration as part of the audit review, which Djerriwarrh's Audit Committee examines very thoroughly. There are other questions?
Yes. Thanks, John. We have a couple of questions from the Australian Shareholders' Association, so I'll go through these. First one, then give an answer, and then the second one following that. A question from Frank Thompson representing the Australian Shareholders' Association. Djerriwarrh and Australian Foundation Investment Company are very closely associated. AFIC's employees carry out Djerriwarrh's day-to-day operations and investment activities. Two directors of Djerriwarrh serve on the AFIC board. I would note one of those is Mark, of course. Djerriwarrh has a significantly higher management expense ratio than AFIC, lower total shareholder return, and a similar investment strategy. Why would you choose Djerriwarrh before AFIC as an investment?
Thanks, Geoff. Well, we see each of the four listed investment companies in our stable as providing different strategies for different investors. Clearly, Djerriwarrh is very much focused to people who want a good, strong dividend and want lots of franking credits. Whereas in the case of AFIC, lower yield, perhaps more growth in the longer- term. It's a balance of the growth versus income, and Djerriwarrh certainly suits a particular group of investors.
I think also in comment to the relationship to the management expense ratio, it's clearly a smaller portfolio, and also the activity in the options is actually a more costly process in terms of monitoring and activity within the portfolio itself.
Yep.
Second question from the Australian Shareholders' Association. Djerriwarrh is to be congratulated on the mixture of skills and background of board members. It also exceeds the Australian Shareholders' Association minimum target of 30% of female members. What targets and actions does Djerriwarrh, working with AFIC, have to ensure that these standards are being implemented within the AFIC employees or AICS employees, in fact, that would be carrying out Djerriwarrh's day-to-day operations?
Well, I think, in terms of the employees, we sort of aim to pick the very best employees, with no preference for particular male or female balance. Clearly, we want to build the participation of female executives over time, and it's something we are doing. Those things you can't change immediately, but it's an aspect that we certainly want to achieve.
Any other comments, Mark, from that one? No. Okay. Thank you. Question from Affluence LIC Fund, who are well-known to us. You have quite clearly outlined during the presentation that the discount to NTA is currently at high or near historic highs. This does not compare favorably with the other LICs run by the team. Most of our other LICs trade close to NTA or slight premium. It would be good to have some commentary on what you're doing about a discount for Djerriwarrh in particular.
I'm happy to answer that.
Look, I'll take a first go at that.
Yeah, you go, John. Yeah.
Look, we always take the view that we have no influence directly on the share price and how that may relate to the NTA. Certainly, we had concerns at an earlier period where we traded at a very big premium. We would hope that the current discount is something that is a relatively temporary event. We think it has probably occurred because we had a period of reducing dividends, both as the companies we invested in reduced them and as interest rates and option volatility dropped. I think we feel that if we have a more stable period in terms of dividends, and more certainty in that regard, that the market may close that gap. It's something we can't influence, and we hope it's a relatively short-term event.
I'd also add, John, that we're now more confident about the strategy in terms of dividend consistency. We are doing a lot more presentations to financial advisors and brokers, there seems to be a lot more interest in Djerriwarrh, as we move into this financial year. We have a question from GM Proprietary Limited. Can you please advise what the current profit reserve and franking credits? Do you keep a reasonable buffer or pay out most of the annual profit? Andrew?
Thanks, Geoff. I'll take that. Yes is the answer. The board look at the level of operating profit in terms of setting the dividend, and we've been through what that is in terms of the dividends and the option premium income being the major contributors to that. One of the reasons that the dividend was cut was that it was eating into the reserves at a tremendous rate, and at a rate that the board considered wasn't sustainable. However, having said that, yes, we still do have a, what I would call, a healthy franking and profit reserve balance.
The financial results, the Annual Report indicates that after we've paid the final dividend and taking into account the tax, et cetera, that we had to pay, there was still AUD 0.225 worth of potential dividend in reserves to top up, or to ensure rather, that we can continue to maintain, we hope in the future, that objective of paying a higher yield than the market. I think there is still some fuel in the tank.
Thanks, Andrew. While we're with you, I've got a question here from Mr. Edward Magin. I was advised at the last shareholder meeting that Djerriwarrh profitability is tied to market volatility. Options income was certainly higher in a more volatile share price environment. Why did the profit not rise, but fell instead?
Thank you, Geoff. Hopefully, we went through part of that or a large part of that in the presentation. Yes, the option premium income was up, the dividend income was down by more than the option premium was up. The other thing that I should probably also note is the valuation of options and the amount of money we can get for selling them. Another determinant as well as volatility is interest rates on that. We are, I think as everybody knows, going through a period of very low interest rates at the moment. Hopefully the presentation did go through some of that in more detail, but happy to take more questions through the website, et cetera, if Mr. Magin needs more information.
Thanks, Andrew. We've got a question here. Clearly there's interest in the dividends. Got a question from Mr. Michael Garnsworthy. How can we pay a higher dividend, please?
Right. Well, as you would note, we changed our dividend policy a little while ago to reflect what we earn in terms of profits. On occasions, there may be the potential for some component of capital on top of that. We are really looking at an environment where the payout ratios of companies are important, the option income is important, and the direction that's going. I think as we've seen in the last period, the actions we take in terms of options, et cetera, can add value in terms of the potential to pay dividends. Because we've now moved to an environment where we are retaining some of the capital growth, it gives us a bigger base to earn dividends on into the future. We would be hopeful those things will put us in a better position than we were a year or two ago.
Thank you, John. I have a related question from Ms. Dale Holmes and also from James Dodson and Ann Dodson. It would be interesting to know the strategy behind the reduced holdings in the following companies, considering the expected increase in dividends at BHP, CBA, National Australia Bank, Reece, Wesfarmers, and Woodside. I guess the follow-up question is why have these been reduced given that they are large dividend payers within the portfolio?
Sure. Thanks for the question. They are reduced mainly as a result of option exercises. That's part of the Djerriwarrh investment process. When we write options on stocks, from time to time, we will get exercise, which is a forced sale of that stock. A key part of the portfolio management process for us is to make sure we replace the lost income from those holdings, as was pointed out, and do it in a way where we at least maintain, if not enhance, the quality of the portfolio, and deliver better income and growth in the future. In those cases, those stocks were sold from option exercises, and we replaced it with companies such as Wesfarmers, Transurban, Westpac, JB Hi-Fi, and Coles. The income yield on those transactions has been enhancing for the portfolio.
It's also worth noting that a couple of those stocks that were mentioned there that had reduced holdings from 30th June 2020 to 30th June 2021 have now actually been topped up at better prices. Some specific examples of that would be BHP, where we got exercised as the stock ran from AUD 40- AUD 55. We've since been buying back into that stock at prices around AUD 37. Being patient there has paid off. Similarly, Wesfarmers, we got exercised on stock as the share price ran from around AUD 50 up to AUD 65. Recently, though, we've been buying with the share price back in the mid-50s at AUD 55 and AUD 56. They've been good transactions for the portfolio. The key focus is absolutely replacing lost income as we see fit.
Thanks, Brett. Just a reminder, if you'd like to ask a question, star one on the phone or the Lumi app, in terms of the messaging app in the top of the screen. Finally, a question here from Mrs Marlene Gist on behalf of her grandchildren. Why has Djerri share price remained so low over the years, particularly relative to the other LICs in the market like AFIC, Argo, AUI and Milton?
Right. Well, if you look back a few years ago, we were paying out all our profits we earned. We were also paying out a component of capital, which I think in some years even got up to AUD 0.06 or AUD 0.07 a share. As a consequence, at that time, it was entirely an income stock, not building up any of the accumulated capital growth. We've now moved to an environment where we aim to get a better balance in that: substantial dividend, but some retained earnings that can compound over time. I think the strategy now will at least provide a better environment to get a component of both forms of appreciation.
Thank you, John. I don't appear to have any other questions either on the app or via the phone at this point in time, John?
Thank you, Geoff. We'll now move on to the formal resolutions of the meeting. Your directors' recommendations are set out in the notice of meeting. The second agenda item is the resolution to adopt the remuneration report. This is required by the Corporations Act to be considered by shareholders annually, and it is advisory resolution only. As detailed in the report, Djerriwarrh has no employees and has a relationship with Australian Investment Company Services Limited, an associated entity of Djerriwarrh, which provides the company with administration and investment services. The financial details of that relationship are set out in the accounts. As such, the remuneration report concentrates on non-executive director fees. Non-executive directors do not receive any performance-based incentives and just receive a flat fee for service as a director. If you have any questions on this item, please submit them now if you've not already done so.
I'll now show the proxies received in respect of this resolution, which are shown on the screen. I'll remind shareholders and proxy holders who've yet to lodge their votes via the app to do so now, as the voting is open. We'll now deal with any questions. Geoff, are there any questions?
No, John, I don't appear to have any questions at this point in time.
Right. Thank you. Third agenda item is the resolution to reelect Alice Williams. Alice was reelected by shareholders at the 2018 AGM and so is standing for reelection by shareholders today. In accordance with Rule 46 of the company's constitution, she retires from the Board of Directors and, being eligible, offers herself for reelection. Alice, would you care to say a few words?
Thank you, Chairman. I've been a Non-Executive Director of Djerriwarrh Investments for 11 years. My background is founded on an accounting and economics degree from the Melbourne University. I also have postgraduate investment qualifications as a Chartered Financial Analyst. My experience includes having practice as an accountant, working with a number of domestic and international financial institutions. I've also been an Australian equities analyst for JP Morgan, focusing on the heavy industrial sectors including transport, building materials, infrastructure, and engineering. Over the past 25 years, I've worked as both a Consultant and a Non-Executive Director. As an Independent Consultant, I have worked with a range of domestic and international corporations and the Australian Federal Government, assisting with corporate strategy development, capital fundraising, government regulatory and competition policy, and foreign investment reviews.
My current board appointments include listed and unlisted companies in the financial services, telecommunications, and medical technology sectors. It has been a pleasure working with the board and management team at Djerriwarrh Investments. My experience enables me to assist in the assessment of investment opportunities, company strategies, industry trends, and the impact of government policies. As Chair of the Audit and Risk Committee, I provide oversight of the financial statements, audit, and risk management activities for Djerriwarrh. I would be pleased to be reappointed by shareholders and to continue assisting in the management of your company. Thank you.
Thank you, Alice. I'll now show the proxies received in respect of this resolution, and these are shown on the screen. We'll now deal with any questions.
There's no questions at this point, John.
Thank you, Geoff. The fourth item of business is the election of Bruce Brook. Bruce was appointed to the board on the 1st of August 2021, and so is standing for election by shareholders today. In accordance with Rule 45 of the company's constitution, he retires from the Board of Directors and being eligible, offers himself for election. Bruce, would you care to say a few words before I put the motion?
Thank you, John. I'm very pleased to be attending my first Djerriwarrh AGM seeking election to the board. I'm sorry not to be able to meet with you in person on this occasion, and I trust there will be opportunities to do so in the future. My background is as a finance executive. I'm a chartered accountant with 25 years ex-executive experience in resources, manufacturing, and banking, and a further 15 years non-executive board experience in those same sectors and in addition, healthcare, energy, and services. My other current board roles are with CSL Limited, well known to many as Australia's leading biopharmaceutical company, with U.S.-based Newmont Corporation, the world's leading gold company, and Incitec Pivot Limited, the explosives and fertilizers company based here in Melbourne. I also serve on the board of Guide Dogs Victoria, which provides services to blind and low-vision people.
What I will bring to the Djerriwarrh board is my financial analytical skills and risk management experience, together with deep exposure to a number of key sectors in the economy and a general understanding of what drives commerce and growth in public companies. I've followed investment markets since my university days, which is a frighteningly long time ago, and I have learned the importance of understanding and investing for the long- term in quality companies. On the personal front, I'm married with two adult children and five wonderful granddaughters aged between two and seven, and as my daughter and her husband are essential healthcare workers, we have navigated through lockdowns as occasional caregivers and homeschoolers, which can be as challenging as any business task I've ever undertaken. Thank you, and I trust that I will have your support at Djerriwarrh. Thank you
Thank you, Bruce. If you have any questions on this item, please submit them now if you've not already done so. I'll show the proxies received in respect of this resolution. These are now on the screen. We'll now deal with any questions.
No, questions relating to this particular resolution, John.
Thank you, Geoff. The final formal resolution is the proposal to renew the proportional takeover approval rules in the constitution. Rules 79 and 80 of the company's constitution allow a majority of the company shareholders the opportunity to consider and either accept or reject a proposed proportional takeover offer for the company. The Corporations Act requires that shareholders renew these provisions every three years by special resolution, which requires the approval of 75% of votes cast. These provisions were last approved by shareholders at the 2018 AGM. They therefore need to be renewed today for a further three years. The directors consider that it is in the interest of shareholders to have the proportional takeover approval provisions in the company's constitution. The provisions do not apply to full takeover bids.
I move that the constitution be amended by adopting Rules 79 and 80 as set out in the notice of meeting. There is no change to the existing wording in the company's constitution. I'll now show the proxies on the screen. We'll now deal with any questions.
Again, John, no questions relating to this particular resolution.
Thank you, Geoff. Ladies and gentlemen, that concludes our discussion on the items of business. In a couple of minutes, I'll close the voting system. Please ensure that you've cast your vote on all resolutions. My final comment is to thank all our staff for such a good result achieved in a difficult work environment due to COVID-19 lockdowns. It reflects their professionalism and commitment to Djerriwarrh shareholders' interests. Voting's now closed. The results of these votes will be released to the ASX later today. At this point, we would normally be offering you a cup of tea and a sandwich and a chat. We hope we'll be able to do that next year. Thank you all for your continued support and for the interest shown in the affairs of the company by your attendance virtually. Thank you