Good morning and welcome to the 2025 Annual General Meeting of Diversified United Investment Limited. I'm informed by our Company Secretary that in accordance with the Company's Constitution, a quorum is present, and I declare the meeting formally open. Our Company Secretary has confirmed that the notice of meeting has been sent to all shareholders and other persons entitled to receive it within the notice period. Today's meeting will be conducted as a hybrid meeting, with attendees joining us both in person and online through our virtual meeting platform. I'd now like to introduce our Directors and Secretary. On my right is Mr. Tony Burgess.
Good morning.
Mr. Stephen Hiscock.
Good morning.
Mr. Andrew Larke.
Good morning.
Our Company Secretary is in the front row, Mr. James Pollard.
Good morning.
Also present is the Company's Auditor, Mr. Luke Sullivan.
Good morning.
KPMG. Our share registry provider, MUFG Corporate Markets, will conduct the voting by way of poll, and Ms. Julie Stokes of MUFG will act as returning officer. Votes will be counted after the end of the meeting, and results will be published on the ASX. Shareholders attending today's meeting in person can cast their vote using the voting cards provided upon your arrival. Online attendees can cast their vote using an electronic voting card. Please click on the "Get Voting Card" button and follow the instructions on the screen. Online votes can be finalized and submitted up until five minutes after the meeting ends. If you experience any difficulties using the virtual meeting platform, please check the virtual meeting guide on our website or contact the helpline shown on the screen. Online attendees can submit written questions during the meeting by clicking on the "Ask a Question" button.
To ensure questions reach us in time, I ask that you submit them now if you haven't already done so. Shareholders can also ask questions by telephone by following the instructions on the virtual meeting guide. If you'd like to ask a question by phone but have not yet obtained a PIN number, please contact MUFG on 1800 990 363. That's 1800 990 363. Any general shareholder questions submitted and not answered during the meeting will be addressed after the formal business is completed. If we are not able to answer all questions today or if there are specific questions that would be better addressed on an individual basis, we'll respond to them after the meeting. Mr. Secretary, are there any apologies?
Mr. Chairman, there are no apologies. I can also advise I have received a validated list of proxies from MUFG, the results of which will be presented at each resolution.
Thank you, Mr. Secretary. The matters requiring consideration today are outlined in detail in the notice of meeting. The notice will be taken as read. The first item of business is to receive and consider the statement and report of directors, the report of the auditor, and the financial statements for the year ended 30th of June 2025, and to receive any questions from shareholders. I'll now deliver my annual address. DUI's investment objectives are: one, to maintain the Company's diversified investment portfolio of primarily Australian companies and an investment in international markets; two, to invest on a medium to long-term basis or view of providing income and capital appreciation; three, to appropriately manage risks and identify market opportunities as they arise; and four, to provide sustainable dividend income to our shareholders.
Our investment focus is towards quality companies, those with capable management, strong long-term prospects within their industry, and that have a proven dividend-paying record. The investment strategy has proven itself over time, with the portfolio outperforming the index over the longer term. We'll continue with this strategy to look through short-term market volatility and remain invested in resilient, quality companies. Profit after income tax was AUD 38 million for the year to the 30th of June 2025, an increase of 6% on the previous year. If special dividends received, capital gains distributed from managed funds, and fair value movements on unlisted investments are excluded, the result of AUD 35.7 million is an increase of 3% on the previous year. Interest expense on borrowings was significantly lower following repayment of debt.
A fully franked final dividend of AUD 0.09 per share was paid in September, which, with the fully franked interim dividend of AUD 0.07 per share, brought the total dividend for the year to AUD 0.16 per share, fully franked, in line with last year. DUI has maintained or increased its dividend paid per share every year since listing in 1991. Operating expenses, excluding borrowing costs, represented 0.12% of the average market value of the portfolio in line with last year. Including the management fees of the international exchange-traded funds and the managed funds in which the Company has invested, the see-through total expense ratio was 0.16%. Bank borrowing facilities were AUD 100 million at the end of the financial year, and they were undrawn at that time. The composition of the portfolio by sector at the 30th of September is shown in the slides.
The diversified portfolio comprises 27 Australian companies across multiple sectors and internationally focused investments through six ETFs and one managed fund. A full list of the Company's investments at the 30th of June 2025 can be found at the end of the annual report. Our latest acquisitions and disposals during the previous financial year are shown in the slide. Since the end of the financial year, we've sold our holding in IDP Education, and we've increased our holding in Treasury Wine Estates. The performance of an investment in DUI, based on the NTA per share and separately based on the share price, assuming all dividends were reinvested, compared to the S&P/ASX 200 Accumulation Index over the 1, 3, 5, 10, and 20-year periods is shown on the slide.
Our portfolio on an NTA accumulation basis returned 12.7% for the year to the 30th of June 2025, underperforming the ASX 200 Accumulation Index by 1.1%. The Company's relative performance was assisted by an overweight allocation to Computershare and Challenger, an underweight allocation to BHP, and exposure to international markets, which outperformed the ASX 200 Accumulation Index. Performance was held back by overweight positions in CSL, Rio Tinto, and Woodside . The Company's on-market buyback has continued. During the 2025 financial year, we bought back around 1.25 million shares at a cost of AUD 6.6 million. We have since recommenced the buyback after our results announcement and the DRP pricing period, having bought around 633,000 shares at a total cost of AUD 3.4 million this financial year. Shareholders may have noticed that our shares are selling on the share market at around an 18% discount to the pre-tax net tangible asset backing.
This is a worldwide phenomenon affecting the majority of listed investment companies and may be due to the rise in ETFs, that's exchange-traded funds, the higher interest rates available on bank term deposits, and the number of private credit funds on offer. Very broadly, there are nearly 400 ETFs available in Australia, with a market capitalization totaling around AUD 300 billion compared to around only 90 listed investment companies and listed investment trusts, with a market capitalization of around AUD 55 billion. We have sought to counter this discount by bringing to the attention of brokers the long period of dividends without a reduction, that the dividend is fully franked, and the higher yield the discount provides compared to the yield on the underlying portfolio. We've also been buying back our own shares on the market. We actively monitor our investee companies and potential investments.
During the year, the Board had 36 meetings with current and potential investee companies. I now turn to the outlook. We see the Australian economy being resilient but having low growth, modest unemployment and inflation, disappointing productivity, and a government looking for tax reform rather than expenditure reform. We expect Australian interest rates to be cut as the inflation outlook improves, and this should provide some support for the Australian economy. The international economic outlook is extremely difficult to predict, with trade tensions caused by tariff uncertainties and territorial disputes. We continue to be cautious on the outlook for the share market, which is at near record levels, and over the last year, we repaid our borrowings. At this time, we forecast little change in our portfolio, which is held for the long term.
We expect to maintain our dividend per share, although with lower dividends being received from the major resource companies, this year's net income may come in a little lower than the forecasted dividends. That concludes the annual address, and I now invite shareholders attending in person who'd like to ask any general business questions. Please raise your hand, show your yellow or blue shareholder card, and we'll bring a microphone to you. Are there questions? Yes, Paul. Mr. Healy.
Thank you, Mr. Goode, for your very thorough presentation. Just a question on technology, please. The U.S. market's been driven by tech, and we all defer to the Big Seven, the Magnificent Seven, and I was at a conference recently where they were talking about the Magnificent One, which is NVIDIA. I'm just wondering how you're going to manage exposure to tech in DUI going forward, please.
We do it through international ETFs, and we've got large holdings in tech. We hold the Vanguard Information Technology ETF, and we've got AUD 76 million in that. Our cost was only AUD 9 million, so it's been very good over four or five years. We've found the technology is probably cheaper and on solider grounds in the international scene than the startups in Australia. In both cases, we find the yield nonexistent or very low, and that inhibits us somewhat too. Are there any other questions from the floor? If not, I'll ask the Secretary if there are any on the hybrid.
Mr. Chairman, I've received four written questions from our online platform. The first from Stephen Van Emmerik of the Australian Shareholders Association, and he's written, "Firstly, thanks to those shareholders who have passed their proxy votes to the ASA. The ASA is generally supportive of low-cost LICs. Congratulations on your solid long-term record. Unfortunately, like many low-cost LICs, the share price discount to NTA means shareholders are not fully benefited from your efforts. How do you explain this discount and what might lead to it increasing or decreasing in the coming years?
How do we explain it? We think it's worldwide. We don't think our discount, though high, has widened any further than other major listed investment companies. We've tried to counter it by making brokers aware of the portfolio and that at a discount, you buy in at a, you get a higher yield than is available on the underlying portfolio. We've maintained our dividend, and we've entered into a buyback. As I said, this is an industry-wide phenomenon. It happens sometimes when yields are available elsewhere on term deposits, high yields there, and credit funds give rise to people investing there. Also, in a very buoyant market, people tend to go for, take the initiative themselves and go for more speculative momentum stocks rather than a diversified portfolio, and the discount historically has been narrower in bearish markets than in bullish markets.
We've done what we think we can do about it and that we bring the discount to the attention of investors.
Thank you. The next from Ian Whiting, and he's written a question about LIC shares trading at discounts to NTA. One important factor often not mentioned is that when shares are generally trading at very inflated prices, as they are at present, a substantial part of the discount is illusory. Share buyers seek a discounted share price containing reasonable protection from this factor. No doubt the price selected by the DUI Board for the share buyback is calculated similarly. Shareholders should not be too concerned about the scale of discounts in current circumstances.
I agree with the shareholder comment. In buoyant markets, the discount winds, and if you're buying because of the discount, you've got to also realize that the market might fall overall. It's relatively, it's an attractive investment, but if the market falls, all shares fall, or most shares fall, sorry.
Thank you. Next question from Stephen Mayne, and he's written, "Treasury Wine Estates was one of our stable's new investments in 2025. Its share price has crashed recently. TWE is holding its hybrid AGM less than 100 m from ours right now at the Sofitel. John Mullen, the TWE Chair, is clearly overboarded as he...
Say that again.
He's overboarded. Too many board positions.
Yes.
As he is also Chair of Qantas and Brambles. As an authoritative voice in the director community, has Charles Goode counseled Mr. Mullin to resign from one of his positions, and does he have a view on what has gone wrong at TWE ? Could an overcommitted Chair be part of the problem?
I think Mr. Mullen's an excellent Chairman, and the companies he's been Chairman of have done well over the period. We have confidence in his chairmanship, and I'm sure he'd make a judgment whether he had too much on his plate or not. I think the problem with Treasury Wine is we bought it a little while back on the basis that it had a yield of 5% or more, and the company had given reasonable guidance that the Chinese economy was reopening to wine imports from Australia. What's happened in recent advice is that the Chinese market hasn't been as buoyant for wine, premium wine, as was expected. They're not giving gifts away at banquets like they used to. The U.S. market is difficult. California's had a very good grape crop, and there's oversupply of grapes and wine, and Treasury is changing its distributor in California.
In a nutshell, we bought because there was a yield, and we thought the company had a lot of value in its brand over the longer term. We still think that, but short term, the Chinese market has not been as buoyant as they thought, and the U.S. market is suffering from an oversupply of wine. Wine and grapes, it's a cyclical industry. You have an oversupply, then it takes a year or two where farmers reduce the vineyards and go into other crops, and the market historically has recovered. We're there for a long term in a leading company in the industry, but we went in too early.
Thank you. Next question, again from Stephen Mayne, and he writes, "Well done again for running a perfect hybrid AGM. The formal presentation was insightful. The proxies were disclosed early. There were no protest votes based on what happened at AUI yesterday. You're going to voluntarily disclose the headcount data like at the scheme meeting." He's referring to our results of the meeting we announced yesterday for AUI, which will make public retail shareholder sentiment incomplete. Sentence there, whilst also highlighting how voter participation rates have crashed. Does Chair Charles Goode have any thoughts on how AGM attendance and voting rates can be stimulated?
Mr. Mayne asked us if we would give the number of shareholders voting for and against resolutions, as well as the quantity and percentage of the shares, and we've done that. I agree with him that hybrid meetings do encourage a wider participation in the AGM, and we encourage shareholders to come to the AGM or participate in the hybrid meeting.
Thank you. One final question from Stephen Van Emmerik, and he's written, "Can you talk us through the reasons for a couple of the major sales and purchases that occurred during the past financial year?
Yes, does he ask any particular one?
Not specifically. I can refer back to our list, and I could call out our largest acquisitions. Challenger and APA were significant investments for us.
On Challenger, we think the company's in a good position is that we're in an aging population. It's providing annuities, and the government or the regulatory authority is looking at altering the capitalization rate required in Australia to an international level, which would assist the company. We think, and if interest rates fall, I think that helps the yield on the annuities. We think they're getting their act together and got a good outlook. On APA , we saw a good yield from the leading gas pipeline company in Australia, and both have done well for us.
On our disposals, we fully sold out of our holding in Sonic Healthcare.
Sorry, in?
Sonic.
Healthcare, it's a good company, but the PE was over 20, and we looked at their growth for the last five or six, seven years and took out acquisitions, and it was only 3% or 4% per annum growth. We thought it was fully valued, and we do have still a large shareholding in CSL, and that has a very low cost level. If we reduce that, there'd be a lot of tax payable. We thought we were well represented in the health industry through CSL.
Thank you, Mr. Chairman. Touching on that one question we've just received from [George Coponides], could you please comment on the outlook for DUI's holding in CSL?
CSL, 20 or 30 years ago, was growing at 20%, and until recent years, it's been growing at 15%. We think the outlook is more like 10% growth, and they've got a short term, we think, a short-term problem in vaccination sales for flu and other diseases in America, with the Secretary of Health there talking against injections. We think that's a passing phase. CSL also has admitted that they have some problems in certain issues. They've reduced their research to their main products now. They've sold a few, closed a few of their less performing plasma centers. We think they're now addressing the issues. They've identified the issues, and their management and their board are focused on them. While it's suffered and caused our asset backing to fall, as it was our leading share holding, and it's still one of our largest, we haven't sold any.
It's come down in price. Our NTA's suffered because we've had this large share holding with the market well above our cost price, and it's gone down from AUD 300 to AUD 200. We've looked at it at AUD 200, and we feel very comfortable that it's, in our view, it's formed a base, and it will probably improve from here on.
Thank you, Mr. Chairman. I have no further written questions.
I'll ask the operator, are there any telephone questions?
Chairman, no questions from the phones.
Okay. We come to the resolutions. Resolution 2 is a non-binding resolution and is that the remuneration report that forms part of the Director's Report for the company for the financial year ended the 30th of June 2025 be adopted. Proxy votes received before the meeting are as presented in the slides. Shareholders attending in person who would like to ask a question on this resolution may now raise your hand, showing your shareholder card. Any questions? If not, I ask the Secretary if there are any on the digital connection.
No written questions.
I ask the operator if there are any from the phones.
No questions from the phones.
I'll now move on to the next item of business. Since the next resolution concerns my reelection as a Director, I'll invite Mr. Stephen Hiscock, Lead Independent Director, to chair the meeting for Resolution 4. I think it's Resolution 3. For Resolution 3, it's customary for each Director to say a few words before they come up for reelection. All I can say is I give this company considerable time. We have a lot of meetings with our companies that we invest in, I think 36 meetings last year, and I'm very happy to be available for reelection as long as my health stands up, and it seems to be doing so at the moment. I'll pass to Mr. Stephen Hiscock.
Thanks, Mr. Chairman. Resolution 3 is that Mr. Charles Goode, a Director retiring from office by rotation in accordance with Clause 65 of the Constitution, being eligible, is reelected as a Director of the company. Proxy votes received before the meeting are as presented in the slides. Shareholders attending in person who would like to ask a question on this resolution may now raise your hand, showing your shareholder card.
Okay, no questions. I'll now ask the Secretary to read out any written questions regarding the resolution.
Thank you, Mr. Chairman. I have one written question from Mr. Stephen Mayne, and he's written that the notice of meeting has two references to Charles being Chairman Emeritus of other organizations. This seems to be a growing thing with both Reece founder, Alan Wilson, and Rupert Murdoch adopting the title after formally retiring from the public companies they long led as executive chairs. Could Charles explain what sort of access to documents and meetings a Chairman Emeritus has in practice or should have? Given he's now 87, has he considered moving to Chair Emeritus at DUI as so far as his emeritus portfolio has not included any public companies?
I retired as Chairman of Flagstaff Partners, and Mr. Tony Burgess became Chairman, and they invited me to retain an office, and as I've been a founder, to take the title of Chairman Emeritus, and I agreed to that. Access to documents, if they ask me to assist in something, then I'm involved. If not, the company, I'm not really a full-time employee. The company continues with its operations. In respect to the Ian Potter Foundation, when I retired as Chairman, they said that they'd like some association or recognition that I'd been there as Chairman 36 years, and they offered me Chairman Emeritus, which I accepted. I don't think I've been in their office since I retired. It's given me access to no documents. They might ask, ring me occasionally about some historical matter, but that's as far as it goes.
No further questions.
Okay. Thank you, Mr. Secretary. Operator, are there any questions regarding this resolution that have been received by telephone?
No questions via the phones.
Okay. Thank you, Operator. As there are no further questions on Resolution 3, I will now move to the next item of business and invite Mr. Goode to resume the Chair for the remainder of the meeting.
Thank you, Mr. Hiscock. We now move to Resolution 4. Resolution 4 is that Mr. Stephen Hiscock, a Director retiring from office by rotation, in accordance with Clause 65 of the Constitution, being eligible, is reelected as a Director of the company. Proxy votes received before the meeting are as presented in the slides. Shareholders attending in person who'd like to ask a question on this resolution may now raise your hand, showing your shareholder card. Prior to doing that, I invite Mr. Hiscock to say a few words.
Thank you. Thanks, Charles. I've been in investment since 1987. I've chaired SG Hiscock, which is an investment management organization, since 2001, and before that, I ran National Bank's Funds Management Company. I've been on the board for just over 10 years here.
Thank you, Mr. Hiscock. Are there any questions from the floor? If not, are there any questions through the computer hybrid?
No questions, Mr. Chairman.
Mr. Operator, are there any questions from the phone?
No questions from the phones.
Okay. I'll now move to the next item of business, which is Resolution 5. Resolution 5 is a special resolution and is that the proportional takeover provisions in the form set out in Clause 25 of the company's Constitution be renewed for a period of three years from the date of the meeting. Proxy votes received before the meeting are as presented in the slides. Shareholders attending in person who'd like to ask a question, would you please raise your hand and show your card? No questions. Mr. Secretary, are there any questions?
I have one question from Stephen Mayne, and he's written, "Do we really need to renew this proportional takeovers provision? Are we worried that the ever-aggressive Jeff Wilson might attempt a partial takeover one day? Can the Chair cite any examples where a proportional takeover has been launched against an LIC, and what would be so bad if such an offer was launched? Which law firm advised us to put up this resolution?
We're not worrying about any proportional takeover proposal coming to us, but if it did arise, we think it's advisable to have the flexibility to have this provision as it gives fairness to all shareholders. I can't remember who the legal firm was, but it's not uncommon to have this facility. When we put it in originally, we gave all the pros and cons about the facility and came to the conclusion that it was in the benefit of shareholders to have it available. Any more questions?
No further questions, Mr. Chairman.
Operator, are there any questions on the telephone?
No questions via the phones.
Okay. That concludes the resolutions and the questions. I thank Mr. Mayne for giving us some questions to answer. This brings us to the end of today's meeting. Shareholders attending in person who are intending to vote on the formal business of the meeting should now finalize and submit their votes with the MUFG representatives near the entrance of this room. Virtual attendees should now finalize and submit their votes using the online voting form, as voting will close in five minutes' time. The results of the voting will be released on the ASX once votes have been counted at the meeting. Thank you for attending this annual general meeting today. I now declare the meeting formally closed and invite shareholders to join directors for discussion afterwards. Thank you.