Good afternoon, and welcome everyone. Welcome to the scheme meeting of Diversified United Investment Limited. My name is Steve Hiscock, and I am the Lead Independent Director of DUI. Today's meeting has been convened following an order of the Federal Court on 12th of March 2026, in order to consider the proposed merger of DUI with Australian United Investment Company. Really great to watch for shareholders who invested many, many years ago. 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 scheme meeting has been sent to all shareholders, and other persons entitled to receive it within the notice period and online through our virtual meeting platform. I would be grateful if you could check that your mobile devices are switched off.
It's all right, and/or on silent. I note that the taking or recording of photographs, videos, and audios of this meeting or its proceedings by any means is not permitted. I would now like to introduce my fellow independent director and the company's DUI and AUI. Mr. Anthony Burgess AO is a governor of the Ian Potter Foundation, which has entered into a call option agreement with AUI in connection with this scheme. While they are not part of the IBC, I acknowledge the attendance of Mr. Goode and Mr. Burgess today. Joining me today as part of the IBC is Mr. Andrew Larke. The votes will be counted after the end of the meeting, and results will be published on the ASX website later today. I now declare the poll open on the item of business, should you wish to cast your vote now.
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 as an electronic voting card. Click on the Get Voting Card button. 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 Ask a Question button. To ensure questions reach us in time, I ask that you submit them now if you can. Shareholder questions submitted and not answered during the meeting will be addressed after the formal business is completed.
If we're not able to answer all the questions today, or if there are specific questions that would be better addressed on an individual basis, we will respond to them after the meeting. Mr. Secretary, are there any apologies?
Mr. Chairman, we've received two apologies, one from Mr. Sandy Hancock. Presented at each resolution.
Thanks. Thank you, Mr. Secretary. The matter requiring consideration today is outlined in detail in the Notice of Scheme Meeting. The notice will be taken as read. As announced on 30th of January this year, DUI and AUI have entered into an Implementation Deed for a proposed merger to be effected by way of a scheme of arrangement, AUI shares in exchange for the DUI shares. Based on the exchange ratio announced to the ASX on the 10th of April, eligible DUI shareholders would receive approximately 0.4724 AUI shares for every DUI share held at the scheme record date under the merger. The scheme may only proceed if the requisite majorities are obtained from those present and voting, and at least 75% of the votes cast. In addition, approval by the Federal Court of Australia and other conditions as summarized in Section 13.4 of the Scheme Booklet.
The scheme may only proceed if all these are met. Prior to the announcement of the scheme, a committee of independent DUI directors was formed to consider the proposal. The potential benefits of the scheme are set out in Section 4.1 of the scheme booklet. These benefits include greater scale and flexibility of a much larger investment portfolio, increased dividends. The AUI board has confirmed that in the absence of unforeseen circumstances, after the merger, it expects to maintain AUI's current annual fully franked dividend of AUD 0.37 per share. Holders of new AUI shares are expected therefore to see an increase to fully franked annual dividends of approximately 33%. In addition, there are cost savings of an estimated 21% or AUD 700,000 per annum for the merged group.
The independent directors have also considered potential disadvantages and risks of the merger, which are set out in Sections 4.2 and 11. The potential disadvantages and risks. DUI's largest shareholder, the Ian Potter Foundation, is strongly supportive of the merger and has confirmed to DUI that it intends to vote in favor of the scheme in the absence of a superior proposal. Moving on to the independent expert, Kroll Australia was appointed as the independent expert to assess the superior proposal. I confirm that the conclusion of the independent expert remains unchanged. The independent directors unanimously recommend that DUI shareholders, other than AUI, vote in favor of the scheme in the absence of a superior proposal, and subject to the independent expert continuing to conclude that the scheme is in the best interest of DUI shareholders and with any other interested parties that could potentially lead to a superior proposal.
I will now turn to the proposed timetable for the implementation of the scheme. If the scheme is approved at this scheme meeting, DUI expects to take the scheme to the Federal Court of Australia for approval on Monday, the 20th of April, 2026. On Tuesday, the 21st of April, 2026, which would be when the scheme becomes effective, DUI expects to be suspended from trading on the ASX as at the close of trading on that day, i.e., Tuesday, the 21st of April. DUI shareholders on the register at 7:00 P.M. Melbourne time on Thursday, the 23rd of April, 2026, will be entitled to receive the scheme consideration. AUI shares will be issued to you on the implementation date, being Thursday, the 30th of April 2026.
On behalf of the independent directors of DUI, I would like to take this opportunity to thank you, shareholders, for your continued support over this process and over many, many years. This brings us to the scheme resolution. This is the single item of business for this meeting as to how to vote. I, as Chairman of the scheme meeting, will vote in favor of the resolution. Shareholders attending in person who would like to ask a question on this resolution may now raise your hand showing your shareholder card. Yes.
Thank you. My name is George McGregor. I went to see JBWere, because the company which I had co-founded had just been taken over, and I therefore had money that had previously been invested in that company, looking for a home. I was persuaded by JBWere, for a number of reasons, to invest in DUI in the IPO. I am a significant investor in the company, and having spent my own life in the business life in retailing, I had a high regard for the Myers, both as retailers and as serious about a quid. No question. I've hung on for the last 10 years. For the last 10 years has been extraordinarily disappointing, really. During that period, I obviously considered at times the possibility of buying no more, and instead perhaps the suggestion was that I might invest in AUI, its sister company. I prefer the hard place.
I felt that DUI were making a good move in putting about 20% of the money overseas. If they had invited me to join the board, I would have probably opted for more like 35%-40%. As a serious investor, because I have been a serious investor, basically, that's where the groceries come from these days. I would invite you all to think that we've really got two decisions to make as investors. One is we're being forced to sell DUI. The second decision is whether or not to stick with AUI. Now, that does not mean that I'm going to sell DUI if I'm not satisfied before the changeover. To accept AUI with a view to not staying there is effectively. One of the arguments that's been put in favor of this is that larger listed investment companies run at a lower discount to NTA.
I would say, with the greatest respect to AUI and to Kroll, that is bullshit. I have here at the date of that printout, which I admit is the 23rd of March, because they do it monthly. The percent discount on AUI was 18%, 18.1%, and DUI was 17.5%, and I don't take responsibility for those figures. They're taken straight off the printout from Bell Potter. AUI has chased AUD 1.2 billion, AUD 1.3 billion. Looking now at other listed investment companies to see what their discounts are, it's nowhere near that high. For example, Australian Foundation, much bigger, has a 12% discount. AMCIL, managed by the same people, 11%. In the case of MFF, which for those who don't know, is an investment company that only invests outside Australia. It's down to 4.1%. For what it's worth, AMCIL, Mirrabooka, and Djerriwarrh are significantly smaller market caps. Significant.
million, not billions. Mirrabooka, 555, 747. Admittedly, MFF is bigger, but I think there are other reasons for that. I then looked at another group dismissive of the argument that greater size means smaller discounts on NTA. Just not so. WAM Leaders are at a premium of 1% on this date. I know because I have shares there. WAM Capital has a premium of 24% on that date. About AUD 1.8-AUD 1.9 billion. But they've got lots of smaller ones. WAM Research has a market cap of 200, 230, 237 actually. It has a premium of 18%. A premium, not a discount. It goes on. WAM Active has a discount of 8.7%. Discounts of about 8% for WAM Income Maximiser and WAM Strategic Value.
The cynics would say that what that shows, the fact that they've got much lower discounts and indeed a fair number of premiums, and the same can be said for AFIC, is that maybe coincidentally, if you are among the staff means you get a better result. Certainly, AUI and DUI are standing out as having a high discount on the net tangible assets, compared with both the AFIC group and even more so the WAM group.
Yeah. Look, I absolutely agree that the discount really refers not to a point in time, but to a historical observation over, say, the last 10 to 15 years. It was not so long ago that DUI virtually traded at a 0% discount to NTA. We have been shocked by the size of the discount. The performance of both AUI and DUI over the last 10 years has been excellent in the portfolio sense. DUI and AUI have instituted a buyback. Now, they're both suspended, of course, at the moment. But we've tried everything we can.
Have you?
to narrow the discount.
Surely AUI could help push up or reduce the discount by buying into DUI and vice versa. There are other listed companies that do that.
Yes. Look, we have Mr. Charles Goode. There's no other common directors, and we've certainly not made any instruction to AUI to buy our shares.
Right. Disappointing. At the moment, we are still dependent on getting the class ruling.
That's true. Yeah.
I don't know if everybody realizes what's at stake there. Basically, it makes a difference as to whether or not the value of those AUI shares is more than the price you paid for DUI, you'll be up for tax, which you have to pay in cash. Whereas if they get the class ruling, it will not be taxed in that way. It will just be rolled over as if the AUI shares had been originally purchased at whatever the price was of the DUI one.
Look, I'm not aware of.
1991 at AUD 1 a share.
Yeah.
Basically, and the equivalent with the AUI ones, it means that I could be treated as a sale and repurchase of AUI.
Look, I think we need to take this. [crosstalk]
At AUD 5, and that would mean I'd have to pay a AUD 1's worth of tax. I don't think that's a satisfactory situation.
I don't believe that's the case.
A detailed section on taxation, including the expected consequences, as Mr. Lark outlines, that Australian resident shareholders are expected to be eligible for capital gains tax rollover. We have applied for the class ruling on behalf of DUI. Consistent with the normal ATO practice, that will not be published until later in time. However, there is no aspect of this scheme which is any different or which gives us any reason to believe scrip transaction. So from our perspective, there's no reason to expect anything other than the usual position, which is that following the scheme, the class ruling will be obtained and the treatment, as outlined in the booklet, will be achieved. Again, I would just add that the class ruling is only something that is done to give shareholders additional certainty and comfort.
It doesn't change the actual position in relation to the interpretation of the tax law, which, as I say, is set out in the booklet. Rollover relief, and therefore no adverse tax consequences.
No, sorry. Excuse me. [crosstalk]
That does not answer my question.
Go ahead.
Yeah. I have noted that the government, God bless them, are short of cash at the moment. What you're saying is that all the reasons that it could be refused seem to.
Will not do it before the outcome of the meeting period. That's why.
Other people may have total confidence in the ATO and the government. I'm more cynical in these matters.
While we love the ATO dearly, of course, unfortunately we have to abide by what the standard protocol is, and unfortunately they do not give a binding ruling.
It's all for me. I hoped that we would have a beauty parade of the people who'll be managing our money when this all goes through, i.e., the directors of AUI, to tell us why it's all going to be such a splendid thing. For that, no sign of them until we've handed our money over, and that's it. If we're disappointed, tough luck, folks.
Jim-
I'm sorry, but that's not the same thing as the people who are working there. I have mentioned before the absence of succession planning, and I speak, I may say, as a geriatric myself, somewhat older than Mr. Goode. A final question is on the total omission of Foundation, which is the largest investor in AUI and will be by far the biggest investor in the new enlarged AUI. Fine. No problem. There is a problem. He's also the chair of the biggest listed investment company that's our competitor, Australian Foundation. No mention of that. I don't know whether you guys considered it when you were looking at all this. It screams of conflict of interest.
Mr. Anthony Burgess AO, who's on the DUI board, is on the foundation as well.
Yes, I know.
So-
I've met Mr. Burgess. I had the privilege of.
Question. We have received a number of questions about this, and James, I know you were going to read them out, but I'll paraphrase. We had three questions written in, and they were all to do with the percentage of international investments, which is something that you referred to, which is currently around about 22% of the portfolio, 20%-22%. The AUI's current investments of the combined portfolio, and AUI have stated that if the scheme is implemented, they will hold international investments initially, and then they will review what to do as part of the process. All shareholders will be kept up to date, and the investment strategy going forward will be communicated to all AUI shareholders. Thank you for your questions. We've covered the written questions as well.
Yeah.
Are there any other written questions?
There is the online platform. Just one moment. Okay, so via the online platform, I have six questions. The first from Mr. Steven Mayne. "AUI's EGM earlier this week, which I assume you'll be doing today as well. I've just voted in favor online at this DUI meeting and was hoping you could undertake to publish a recording of future AUI shareholder meetings online for the benefit of shareholders unable to attend. This is best practice and would be appropriate given the larger size of AUI going forward." "Do you know roughly how many other shareholders have taken this approach?" Referring to holding both companies. "In other words, we're going into this merger with a reported 6,600 DUI shareholders and 5,000 AUI shareholders. Roughly how many different shareholders will we have when we combine the two registers?" Moderate proportion of commonality between the two registers.
Of course, the entitlements to the new AUI shares determined, if approved today, at the record date, which is subsequent, so we don't know the exact figures. Yeah, certainly not a combined number. It could be 8-10,000. There's a bit of work to do before we know that final number. Next question. "We'll be voting for the resolution as it appears well thought out and well-intentioned. We hope in the medium term, it reduces the discount to NTA for DUI and AUI shareholders. What were the main motivations for the scheme, and what other options were considered?
The main motivations for the scheme was to address that on average over time, we'll create a lower discount. That's why we believe we should all vote in favor. What was the other question, sorry?
We've tried buybacks.
Look, that's a very good point. Thanks, Andrew. We have tried buybacks. We've had a buyback in place for many years, as has AUI. That has a short-term impact on the share price, but once the buyback stops, it reverts back to the old discount. Market forces are at the moment, one could say that the general market forces are predominantly going towards ETFs. I look at this portfolio, and I look at AUI's portfolio, and I go, "I can buy a dollar's worth of shares at AUD 0.80." To me, I'd much rather buy that, and this is not an advice re-
That covers the question.
Thank you. Are there any other questions, operator, on the telephone?
Sorry, I do have more written questions.
Oh, you do?
Sorry, that covered that question from Mr. Van Emmerik. Next question from Mr. Stephen Mayne, and he writes, "Thank you for disclosing the proxies early to the ASX along with a formal address. I was a little surprised to see an 8.1% protest vote from 20 holders.
That's the first thing. The second thing is it's our understanding that a significant amount of that vote is represented by one overseas shareholder. We've not ever had any communication. They didn't tell us when they bought in, and they've never told us their reasons. We really don't know their identity. Well, we know their identity, but not directly through communication. I can't speak for their-
Issues see most of the directors retain their positions on the combined board. Given that DUI is a AUD 1.1 billion company, why didn't more of our directors land a gig on the combined board going forward, especially given the small size of the AUI board?
While the AUI board may be small, it has got excellent people on the board. With Mr. Good remaining resigning or retiring as part of the process, we will not be joining the board. That's up for Mr. Good and AUI to have a look at whether they need more people.
Thank you.
Thank you. That's a very good point. Thank you, The other thing is that directors cost money, and so with three less directors, that is saving.
Question that I have is from Mr. Chris Webb, and he writes, "Why did the board persist with a DRP when it is value destructive when a merger is being proposed?
First of all, the DRP is not a significant amount of shares. I want to make that clear. The second thing is that there have been many shareholders over a long time who have chosen to do the DRP.
Thank you. No further written questions, Mr. Chairman.
Thank you. Operator, are there any questions on the telephone that we've received?
Mr. Chairman, there are no telephone questions regarding this resolution.
Okay, thank you, operator. Moving on. Look, that brings us to the end of today's meeting. Shareholders attending in person. Near the entrance of this room. Virtual attendees, please now finalize and submit your 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 the votes have been counted after this meeting. Thank you very much for attending the scheme meeting today, and I now declare the meeting closed, subject to the conduct.