Good afternoon, ladies and gentlemen. Welcome to the 25th Annual General Meeting of Mirrabooka Investments Limited. My name is Greg Richards, Chairman of your company, having taken over from Terry Campbell at the conclusion of the last AGM in 2022. The company secretary has confirmed that quorum is present, and I'll now open the meeting. I would like to begin by acknowledging the traditional owners and custodians from all the lands we are gathered on today and pay my respects to the elders, past and present. Before we move on to the more formal part of the meeting, I think it's worthwhile reflecting on the unique position Mirrabooka has in the broader listed investment company landscape, and for that matter, the broader investment market in Australia. The company is internally managed, meaning there is no external fund manager taking a management fee.
As a result, it operates at a relatively low cost with no performance fees. With an MER of 0.59%, the cost to shareholders is much lower than comparable investment vehicles that focus on small and medium and mid-sized companies in the Australian and New Zealand markets. I will also take this opportunity to introduce Kate Logan, a partner of the company's auditors, PricewaterhouseCoopers.
Sorry, you.
I'll start it. Okay. Mirrabooka has also delivered consistent outperformance against its benchmark since its inception in 1999, and has provided significantly fully franked income to shareholders over this time, in what is a more volatile segment of the broader Australian equities market. At Mirrabooka, the role of the board on behalf of shareholders is twofold. The first, as you would expect, is to ensure appropriate governance and management of the business and risks, review performance, and ensure appropriate compliance with regulatory requirements. Secondly, it is to try and contribute to the thought processes of the investment team, who are ultimately responsible for portfolio outcomes. For example, this can take the form of the testing of ideas or providing thoughts on companies and people, given directors' extensive networks and industry knowledge. I will now introduce those on the stage with me.
We have our Managing Director, Mark Freeman.
Good afternoon.
My fellow non-executive directors, Ian Campbell.
Afternoon.
Jackie Fairley.
Good afternoon.
Annette Kimmitt.
Good afternoon.
Tony Walls.
Welcome.
We also have our Company Secretary, Matthew Rowe.
Good afternoon.
Our Chief Financial Officer, Andrew Porter.
Hi.
Our General Manager of Business Development and Investor Relations, Geoff Driver.
Good afternoon.
In due course, we'll be hearing from Portfolio Manager, Kieran Kennedy, and Investment Analyst, Stuart Lowe. We are also joined by other members of the investment team in the front row of the audience. I'll also now take this opportunity to introduce Kate Logan, a partner with the company's auditors, PricewaterhouseCoopers, who is available to answer questions today on the audit and the preparation and content of the auditor's report at the end of the presentation. Today's presentation has been released to the ASX and made available on the company's website. I remind shareholders using the online platform that while questions can be submitted at any time, I will not address them until the relevant time in the meeting. To ask a question, select the Q&A icon. Type your question into the text box. Once you've finished typing, please hit the send button.
Please also note that your questions may be moderated, or if we receive multiple questions on one topic, amalgamated together. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button, as the vote is automatically recorded. You will receive a vote confirmation notification on your screen. I now declare voting open on all items of business, and I will give you a warning before I move to close voting. Moving on to the business of the meeting, I will take the notice of meeting as read, and with regards to the minutes of the 24th Annual General Meeting, they have been signed as a correct record and are available to shareholders for inspection today. As with previous years, we will commence with the formal resolutions and then present on the activities of the company.
The first agenda item is the consideration of the financial statements and the reports for the year ended 30 June 2023. As is our normal practice, this item will be covered after the statutory part of the meeting, as the matter does not require a shareholder resolution and is part of the presentation. Our executives will touch on the matters that relate to our results, portfolio, and performance. 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 of the auditors, if they have any questions about the audit. Before we move on to the formal resolutions, I just wanted to note that we have received some questions prior to the meeting about our relationship with PwC as our auditors.
The discussions in the public arena about PwC focus foremost on the tax advisory practice and the reputation of PwC in its entirety. PwC are our auditors and are not our tax advisors. Secondly, as is mandated, our audit partner at PwC changes every five years, and alongside that, there are changes in the underlying team conducting the audit. The change in PwC audit partner last occurred in May 2022. At this stage, we remain comfortable with PwC as our auditor and assurance partner. We will continue to follow the issues that have been reported. We've discussed them internally and discussed them also with PwC. We've sought and received assurances from them about how they are dealing with the situation, and at this stage, we are satisfied with that.
If there are any further questions about PwC, we can cover these in the question and answer session that follows the presentation by the investment team. We now move to the formal resolutions of the meeting. Your directors' recommendations are set out in the notice of meeting. 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. Voting today will be conducted by way of a poll on all items of business. Representatives of Computershare will oversee the conduct of the poll. Firstly, if there is any person present in the room who believes they are entitled to vote but has not yet registered to vote, would you please seek assistance from our share registry, Computershare?
For those in the room, on the reverse side of your blue admission card is your voting paper and instructions. I will now go through the procedures for filling in the voting papers. In respect of any open votes a proxy holder may be entitled to cast, you need to mark a box beside each resolution to indicate how you wish to cast your open votes. Shareholders also need to mark a box beside each resolution to indicate how you wish to cast your votes. Please ensure you print your name where indicated and sign the voting paper. When you have finished filling in your voting paper, please lodge it in the ballot boxes that will be available at the end of the meeting. The second agenda item is a resolution to adopt the remuneration report.
This is required by the Corporations Act to be considered by shareholders annually and is an advisory resolution only. The remuneration report can be found in the company's 2023 annual report. The report is only concerned with non-executive directors' fees, as the company has no employees and utilizes Australian Investment Company Services Limited to provide day-to-day operations. I'd now like to invite questions from the shareholders. For those in the room, we have microphones available, and if shareholders could please state their name when addressing the meeting and ask all questions through the chair, that would be appreciated. For those online, if you have any questions on this item, please submit them now if you have not already done so. I will now show the proxies received in respect to this resolution, which are now shown on screen. Geoff, do we have any questions?
No, there's no questions here, Greg. I'll just check there's no questions on the phone either.
Okay, and none from the floor. Okay, moving on to the next slide. The third agenda item is a resolution to elect Tony Walls. Tony was appointed to the board in March 2023 and so is standing for election by shareholders today. In accordance with Rule 45 of the company's constitution, he retired from the board of directors and, being eligible, offers himself for election. Tony, would you care to say a few words before I put the motion, please?
Yeah, thanks, Greg. Thanks, everyone. I guess I've been on the board now for almost six months, and it's been a great privilege to work with the team. I think from my perspective, some of you may know me as the Chief Executive of Objective Corporation. I've known the team at Mirrabooka for probably about a decade now. So, when they invited me to join them, I thought that was a great opportunity. My background, really a software background. I've been in software all my life. I can remember when I was at school talking about great things like artificial intelligence, and I thought at the time, this is gonna be part of the future, and here we are some 40 years on, and it is. So, time comes to all these great things.
So I think from my perspective, almost everything that we invest in today has a technology bent to it, whether it be software or some other form of technology, and really, hopefully, working with the team, and certainly on your behalf, I'm able to provide the occasional insight into where we should be investing in technology. So thanks again, and look forward to re-election.
Thanks, Tony. I'll now show the proxies received in respect of this resolution, which are now shown on the screen. There were no questions asked prior to the meeting concerning the resolution. If you have any questions on this item, please submit them now via online or raise your hand if you're in the room.
I haven't any questions online. Is there a phone question at all?
There are no phone questions.
Thank you. Okay, thank you. Moving on. Ladies and gentlemen, that concludes our discussion on the items of business. Now, we return to the first agenda item, consideration of the financial statements and reports for the year ended 30 June 2023. Before I do that, just to say a few words. The investment team in the upcoming presentation will take you through the key aspects of the portfolio and the investment approach being taken on behalf of shareholders. As you're aware, markets have been volatile over recent years, considering the COVID-19 pandemic, with large variation in returns as many themes, such as rising inflation and interest rates, energy prices, and demand for commodities central to the clean energy transition, amongst others, are driving the market at any one point in time.
Pleasingly, despite this volatility, our portfolio, our portfolio has outperformed over all key time frames. The 12-month return for Mirrabooka, including franking, up to the end of August this year, was 13.1%, whereas the combined small and mid-cap industries benchmark was 3.8%, including franking. More importantly, in the long term, the long-term return, which is our key investment focus, was up 12% per annum, including franking over 10 years to the end of August. The combined industries' return over this period was 9.9%, including franking. The team have also found a number of opportunities to buy stocks, particularly well over this time, assisted by the volatility over the past three years. They'll outline some of these in the presentation.
At this point, I and the rest of the board want to congratulate the team on the outstanding performance they have delivered for shareholders. Finally, the board was also very pleased to have paid another special fully franked dividend of AUD 0.045 per share this year. This brings total dividends for the year to AUD 0.145 per share, fully franked. Last year, total dividends were AUD 0.12 per share, which included a AUD 0.02 per share special dividend. I'll now hand over to Mark, Kieran, and Stuart to go through a detailed presentation.
Okay, thanks, Greg for that, and good afternoon, everyone. It's pleasing to see some people here in a fair bit of rain in Melbourne today. You know, we always enjoy coming out here and presenting the company. It's your company, so this is a formal AGM, but it's an important part of our process that we allow you the opportunity to hear what we're doing, what the team's been investing in. Please stay for the, at the end of the meeting, ask questions. We've got the full investment team here, and they're all keen to meet and talk to you about what we've been doing. Just moving on to the next slide. Just our disclaimer to say we're here, we're not giving any advice, we're just here talking about what the company's been doing.
I'll just start off with a slide on our purpose approach, then I'll pass over to our CFO, Andrew Porter, who will talk through the financial results. Then Kieran and Stuart will talk through the portfolio and markets more generally. I'll just touch on one slide, which is really about our investment approach, what we're trying to do in Mirrabooka. We thought this would be interesting. We do show this at every meeting, but it's always good to go over again. What we're looking for in the companies we invest in. As an investment approach, we are wanting to invest in what we call quality businesses. These are companies that have attractive, sustainable returns on capital or prospects to get good returns.
Often, some of our companies are developing into good returns, but most of our bigger positions in the portfolio are companies that are already earning very attractive returns on capital. We've got a strong preference for companies that have no impediments to growth, so companies that are moving forward, not moving backwards, have positive operating trends, industry trends, strategic trends. We don't like investing into the wind, as it were. Financial strength is critical. Companies that have strong balance sheets are important. It provides resilience in downturns, and it provides latent value in the share prices, and the returns are supported by strong cash flows. Management is critical. It's one thing that I got taught from day one. You need to understand the people and what they're about and their intentions.
Or another way of putting it, management teams and boards that act like a substantial shareholder and who often are. And we have many, what we call, owner-driver companies in our, in the portfolio, and we want the management teams to be experienced, effective, and passionate. So we look for those companies, and then in terms of how we actually manage the portfolio, we buy, taking a medium to longer term of view. We want to pay a fair value for quality, but avoid overpaying for stocks. We'll often build holdings over time as we get more confidence or conviction with the story. We will sell if the investment thesis changes. We do monitor our holdings for excessive valuation risk, and we will trim holdings if we think stocks are overpriced.
We want to maintain a spread of holdings to ensure that there's a consistent return profile. We prefer to have a mix of businesses. We're not looking to shoot the lights out in one particular year. We'd rather have a more balanced return over a period of time. That's a little bit about how we go about looking for companies. And I'll pass on to Kieran, sorry, actually, Andrew, at this point, to talk about the financial results. Thanks, Andrew.
Thank you, Mark, and I'll try and be brief so we can get onto the interesting part quicker. But good afternoon again, ladies and gentlemen, and thank you for joining us both here in our rather wet Melbourne and online. So if we go to the next slide here, I've been through some of these figures before at the results briefing that we did back in July, but I am also conscious that many that are attending here and online may not have attended that. So as I said, I'll be brief, but I am, of course, very happy to take any questions afterwards or indeed over a cup of coffee after the presentations for those of you that are here.
The profit for the year saw a significant increase on the previous year, driven primarily by the profit from the trading portfolio being up by AUD 4.4 million, mainly thanks to investments in Medibank and AMP. Option income was also up by AUD 0.5 million, and dividends received up by AUD 0.9 million to AUD 11.2 million, including a AUD 0.6 million special dividend from OZ Minerals as it was taken over by BHP. The increase in profit also meant that the tax expense went up, as did expenses, and I will come on to that in a minute. As the chairman has mentioned, dividends paid for the year were AUD 0.145, which included a AUD 0.045 special.
We did not need to go into prior year reserves as the operating profit of AUD 0.059 was accompanied by an AUD 0.087 of after-tax realized gain, which covered the dividend. After the payment of this final dividend and special, Mirrabooka had effectively AUD 0.29 of franked dividend in reserves to support future dividends. So I'd say the company is adequately well provisioned for the future in terms of dividend maintenance. The chairman has given a brief update on the portfolio performance. The performance for the financial year that you see here, including dividends and franking, was up 17.9% against 14.2% for the benchmark, an excellent result. And as noted, the team will give more details as to the drivers of that and the more recent performance later.
The management expense ratio, or MER, is a measure of the costs of running the company. It is the actual expenses as a percentage of the average portfolio over the year, and therefore both elements, the expenses and the average portfolio size, have an impact. So the MER went up during the year. Roughly 50% of the increase was from the increase in expenses, which were up just under AUD 400,000 for the year. This increase was foreshadowed last year, and it's largely due to the reallocation of costs between all of the LICs in the stable to better reflect the work effort. The other 50% is a result of the fall in the average portfolio size over the year.
This looks counterintuitive when you see that the portfolio actually went up 17.9% in the year, but that figure includes dividends and franking, and needs to be set off against the fall of 20.9% the previous year, which also included franking and dividends. That figure of 0.59% represents AUD 0.59 for every AUD 100 invested, so we think that is still very good value for a complex area of the market. It is also within the range of historical norms, 0.61% in 2019 and 0.63% in 2020, for instance. But I can assure you that it is a figure that the board watches carefully.
On to the next slide, and this was shown for the first time at the results meeting, and shows the variability of the special dividends that Mirrabooka pays, driven almost entirely by the amount of realized gains that are made each year. These gains arise sometimes by choice, when the team decide to manage a holding size down or exit completely, or when a holding is taken over, as happened to OZ Minerals. Franking credits are always better off in the hands of shareholders, but long-term shareholders will, I trust, also understand the benefit of maintaining a stable, ordinary dividend. As our ordinary earnings per share usually vary between about AUD 0.04-AUD 0.06 per share, the difference needs to come from realized gains, either during the year or from prior years.
The board, therefore, needs to balance the desirability of paying out those gains with the need to maintain adequate reserves to ensure shareholders can continue to receive dividends in the future. And talking about dividends, if we move on to the next slide, this illustrates their importance, and I suspect just puts into figures what many shareholders already know. Over the last 10 years, the share price and the portfolio value have gone up by AUD 0.43 and AUD 0.80, respectively, and I'll come onto the difference later. What these figures don't include, though, are the AUD 1.465 paid out as dividends over that period.
When one includes franking, this means that over the 10 years, shareholders have received grossed up dividends of AUD 2.09 over those 10 years, nearly the same as the value of the portfolio at the start of that process. So if we move on to the next slide, this shows why there is a difference in the amount that the portfolio has changed, and in the amount that the share price has changed over those 10 years, and indeed, over the last year. At the end of August 2013, the shares were trading at a premium of 15%. At the end of August 2022, last year, they were at a premium of 8%.
At the end of August 2023, they were trading at a discount, so that is, the shares were trading at less than the value of the portfolio per share, and the discount was just under 2%. Including dividends, but before franking, the share price return to the end of August of one-year has been 1% versus the portfolio return of just under 11%, and for 10 years, the share price return has been 7% versus the portfolio return of 9.4%. This move from a premium to a discount has not been unique to Mirrabooka and has happened broadly across the LIC space. What appears to be the main driver is the increase in interest rates.
Shareholders who could not get a yield on term deposits or fixed interest investments previously have had to go overweight equities to get any yield. Now, they can switch some of that back into fixed interest, and I've personally seen it myself on charities that I've been involved with, and get back closer to what their target allocations are. We also understand from fund managers, and other brokers, that there's been a general lack of flow into equities as this switch has happened. This has all meant that there's been an increase in sellers and a fall in interest in LICs, and indeed, the broader equity market, which is reflected in the disparity between portfolio and share return, even where the performance has been as good as it has been with Mirrabooka.
With that endorsement, I'll finish up, and as I said, I'm happy to take any questions at the end of the presentation or afterwards over coffee, but I'll now hand over to Kieran.
Thank you, Andrew, and good afternoon, everyone. So today I'm gonna spend a little bit of extra time on the portfolio performance, owing to the significant volatility we've seen in recent years. And I'm gonna touch down on different time frames to explain some of what's been going on in the numbers over that, over that period of time. I'll then hand over to Stuart, who will cover the current state of the portfolio and give some commentary around the recent reporting season, as it relates to the portfolio. And then we'll finish with some outlook comments, including how we're investing your money in the market at the moment. And that'll be a good place to finish, because that's often a good source of questions from the audience at that point. So just starting on performance, the first slide shows the performance. Sorry, turning over.
I've got it here. There you go. Sorry, the performance figures that we issue with our NTA on a monthly basis. This is to the end of August, and this is the standard time frames that we present. Pleasingly, we'll see outperformance, outperformance measured by blue versus our benchmark on in orange over each time frame. And as I mentioned, I'll touch on aspects of each of those time frames on subsequent slides. Just moving on to a longer term basis, this slide is looking at our performance over 10 years and beyond, compared to the ASX 200 benchmark on this slide. The reason we do this is because we think in the long run, that is the main alternative investors have, is to invest in the broad share market, the ASX 200.
Much more money is invested in that than our benchmark, the mid- and small-cap indices. What we're really trying to show here is, is the Mirrabooka product delivering value to shareholders over the long run? Pleasingly, as you can see on the slide, that has been the case, that we've delivered outperformance and quite healthy outperformance over that period of time. Why is this so? We think there's two aspects to it. Really, we think investing in emerging companies and mid-cap companies, you, you can't avoid the fact that there's a wider range of outcomes possible on an individual stock basis. There's more risk, there's more chance of losing money. To compensate for that, investors should reasonably expect to get a greater return.
But to do that, you really have to have some expertise, and you have to be watching the market and have an investment process that stands up over time to deliver that. And if you do, we think there's the ability to find companies that are less discovered by broader market participants, which gives you really good returns in the early stages, and also then to hold those companies for the period of time in which they're really growing their business at more rapid rates and delivering exceptional returns before they become larger and the broader market becomes aware of them. So we think that's been a really good hallmark of what we've been able to do in Mirrabooka, and even though we have had our misses over the years, you can't avoid those, it has resulted in good returns over the long term. I've included this slide again.
This is one we introduced last year to really provide a bit of reassurance at the time around some underperformance we were suffering year year ago. So if you look at the slide, what we're presenting here is our relative performance. Again, this is looking at our benchmark, the mid and small cap indices, and it's our return versus that. So the blue line is looking at that on a 1-year basis, and you can see from the slide that's very variable from year to year. It moves around a lot. The orange line is looking at that on a rolling 10-year basis, so saying, how are we outperforming or underperforming at the end of each month on a rolling 10-year basis? And you can see from the slide, that's far more consistent. Now, the reason for this is again, twofold.
We're not investing to optimize returns on a one-year basis. If you were doing that, you'd turn the portfolio over a lot more and incur a lot more tax. We're really about trying to generate the greatest long-term return we can, and in doing so, we're prepared to be quite different in terms of the composition of our portfolio versus what sits in that mid and small cap benchmark. So if you look at one year ago, we were under a fair bit of pressure at the time, and as I said, I was looking to really provide a bit of reassurance that we have been through periods like that before where we were underperforming. Really, there's a bit of an analogy of a bouncing ball here.
When our performance, you know, really starts to pull away positively against our benchmark, you can expect to get some sort of normalization after that on a short-term basis. But conversely, when we're under pressure, if we continue to do what we're doing, it... You, you often see that there's a bit of a rebound from that on a short-term basis as well. And pleasingly, we've seen in the last 12 months, as is shown by the dotted blue line, that we have had an encouraging rebound in that return. So looking again at performance over a three-year period, and this really picks up the most volatile returns we've had really in Mirrabooka's history. It's been an extraordinary period in investment markets since the COVID pandemic and the various responses the government's put in place to that pandemic.
On the left-hand side, you'll see the returns depicted over one year, firstly, August to August 2021, and then the middle of August 2022, and then the most recent, August 2023. So there's some really significant variability in that. In 2021, we had the best year Mirrabooka has ever achieved, a portfolio return, which is quite remarkable at 46%, outperforming the benchmark by 15%. Again, getting back to that bouncing ball analogy, when you have a period like that and you're a long-term investor, you can expect to see some normalization after that. And we saw that in 2022, where the portfolio was down 22% versus our benchmark down 7%. Moving through to August 2023, in the most recent year, the portfolio up 13% versus the benchmark at 4%.
So interestingly, out of all of that, and all that volatility, all the, you know, the stress and the anxiety that can create, you know, from that volatility, if you look at it over an overall basis on a three-year return, as seen on the right of the slide, they're figures that are totally unremarkable. That's very consistent with what Mirrabooka has been able to produce in its history, with a performance of 8.9% versus the benchmark at 8.1%. This slide really outlines that while volatility can create emotion and stress, it also creates really good opportunity. So what we're looking at here is the last three years and looking at how we've invested the money that we've invested in that period of time.
So tracking the subsequent return of all our purchases and all of our sales and seeing how just that has gone in terms of its contribution to our performance. So you'll see from the slide, we made AUD 388 million worth of purchases over that period of time and AUD 329 million worth of sales. The bars that are shaded in green are where we've had a positive contribution from putting that money into the market and taking it out, and with the orange being the dividends we've forgone on what we've sold.
If you add all that up, basically, it's meant that from that activity in the portfolio, we've had an AUD 30 million dollar net value upgrade to the portfolio, which has obviously been really pleasing and has come about due to some of that significant volatility we've seen in markets.... So I'll just touch on some of those, because I think it really gives a good flavor of how we invest and some of the investment style and approach, comments that Mark made earlier. So starting with the biggest winners, a couple of companies there that I think probably aren't that well known to people who aren't following Mirrabooka or the small part of the market very closely on a day-to-day basis. So firstly, IPD Group. This was an IPO that we participated in, in late 2021.
They're a company that distributes electrical equipment into the Australian market. Their shares have increased more than 400% since we bought into that company in late 2021. So that really goes to that element of, you know, the rewards from really discovering companies before they're well known in the market. Gentrack is a utility software company based in New Zealand. We'd followed the company for a long period of time. They'd had some checkered times. We weren't owners at that point in time, but we knew they had a good product, so we followed their progress with interest. We saw a new energetic investment management team come into place, and we thought they were worth backing, and as it turned out, our timing couldn't have really been better on that one.
So that, we were buying that through late 2021 and into 2022, and again, that's delivered a return of over 300% since we started buying into those shares. So again, that's really that reward of discovery for some of those, you know, companies that are flying beneath the radar. Computershare and Worley are a bit different. You know, these are companies that are obviously well known, and this is more in the mid-cap space part of the market, which is where we, you know, find good investment opportunities as well. In both cases, we felt the market was taking a short-term view, as it often does, and ignoring some medium to long-term latent value in these companies. In Computershare, this was back in 2021, when interest rates were very, very low.
You could see the, you know, huge leverage the company had to a rising interest rate environment. We were in no better place to predict that interest rates were about to go up. They could see that the valuation was taking no account for the fact that they will one day. So we got into that, you know, very well at that point in time. Worley is an engineering company, global presence, you know, really hard to replicate operations that they have around the world. They've had a checkered history, but what we observed there was, as the world is going through this energy transition phase, that's, you know, very apparent to everyone, there's gonna be a lot of capital spent, and there's going to be a need to advise on that and provide the engineering to make sure that happens.
Worley is well placed to do that on a global basis, and not many people are. We think the shares were being held back by their checkered history, and there was a period of time where, you know, the direction of the market and that spend was quite obvious that people were doubting Worley and their ability to execute upon that. So that was an opportunity for us, and both Computershare and Worley have increased by around 60%-70% since we bought into those companies. nib, we bought and have since sold and made a really good return out of that. That was just when there was a lot of doubt around, I guess, the participation in private health insurance and the profit margins of that company.
As mentioned earlier, we don't get them all right, so looking at the biggest losers, so the things that we've bought that have done most poorly for us over the three-year period. FINEOS is one that has tested our patience. We think they've got a really good software proposition for the global life insurance market. It's been one where we've underestimated the amount of money they need to spend on their product before they achieve growing profitability, and the market has really turned on those sorts of companies that are all about returns someday in the far distant future and are looking for profit signals today. We're hanging in there with the company because we think their market presence is, is strong and they have good long-term potential, but it has caused a degree of frustration.
Domino's is one we were buying into, coming off the back of the COVID pandemic. We probably underestimated the amount to which they benefited from that period when pizza was being delivered and food was being delivered at home because people couldn't get out and about. Seems quite obvious now. And they've got themselves into a bit of a difficult position financially, where we think their gearing is higher than it should be, and there's a bit of pressure on because of the franchise model, just to make sure that the profitability is there and that all the participants are in a healthy state. So we're watching that one quite closely, but we do think they've got a really good long-term track record of value creation, so it's one we're not looking to exit without a lot of thought.
PEXA is another that's been disappointing since IPO for us. We think the business they've got in Australia, where they, you know, basically 90% of all the transactions, where people move house or change mortgage providers, they get a fee for that in processing that electronically. We think that's a wonderful asset. We've been frustrated with their progress on the UK business they're trying to create to do similar things, and the market is sharing that frustration and not really seeing clear signs of progress. So that's one we're watching and hoping to see some better outcomes from. And the final category is what we're calling the most valuable sales. So these are things that we've sold that have subsequently fallen quite significantly in value, which is just to highlight what Mark was saying earlier with our process.
You know, if the facts change, you need to be decisive in moving on. Orica is one we've held for more than 10 years. We've been quite patiently looking for them to get more out of their, you know, really good core asset in the Australian market, but recently seen signs with management changes, cost out strategies, you know, very aggressive price rises, that just made it look clear that they were really, you know, scratching around to try and find some growth. So thankfully, we sold out of that. They had a really poor result in August. The shares fell a long way, but we were out of that before that result. And Lark was one where there was a well-documented issue with the CEO, which really called into question, you know, all he'd told us.
So again, we decisively moved on from that one and saved a lot of pain that subsequently felt by other shareholders... And with that, I'll just hand over to Stu for some current thoughts on the portfolio.
Thanks very much, Kieran, and good afternoon all. Just moving on to the next slide. Look, this is a little bit of a snapshot of the top 20 holdings in Mirrabooka, and something we talk about a lot is being long-term in the way we invest. And I think this slide really does illustrate, I guess, the long-term nature of how we're thinking. And as you can see, there's been a number of stocks that have been held for more than a decade in the portfolio, and quite a few that are almost getting up to 20 years, which is a really long-term holding. And I guess this slide also illustrates some of our process.
So when we add a new company, we tend to take probably a modest starting position, and it actually has to really earn its way into the top 20. And what I mean by that is we buy a position, and then we get comfortable with management. We learn a lot about the business model, and as they start to execute, we'll put more capital in it and grow that holding over time. So you very much have to earn your way into the top 20. And as you can see, there's been a number that have been held for years. Of course, there is a caveat to that. If you have a look at sort of stock 18 and 19, IPD Group and Gentrack.
As Kieran mentioned previously, they were bought only one to two years ago, but and at modest sizes, but their subsequent share price move has put them into our, our top 20, and that's... I, I will say that's quite unusual. It normally takes a couple of years to earn your way there. I guess I'll just turn to the next page. Something that came out of reporting season, which we just finished a couple of months ago, was given a lot of the macro issues that everyone's aware of, rising interest rates, inflationary costs, some CapEx blowouts, and I guess some general consumer confidence, uncertainty. A lot of boards are reluctant to put forward guidance out or, or give any indication of where they think earnings might be going.
So one of our challenges is to try and understand sort of the health of the companies, and what we do is look at the dividend policy and look to see whether dividends are increasing or decreasing, 'cause that's a quite a good indicator of the underlying health of the company, and in particular, probably the balance sheets of those companies as well. So pleasingly, over the 54 holdings that we had in reporting season, 27 of those increased their dividend and only six were lower. So just digging into those in a little bit more detail, the largest rises there. I'll put these into a couple of different buckets. You've got something like CTM, which is Corporate Travel Management, EVT and IDP. All those companies were heavily impacted through the COVID years.
They lost quite a lot of revenues, and it was quite a hard period for them. So I would characterize those dividend increases as being sort of a normalization of business. Now that COVID's passed, we're really back to normal times and back to paying a normal solid dividend. And with Computershare and Hub, both of these companies actually benefit from rising interest rates. They, with their business model, they hold on to quite a lot of client cash and make a spread on the interest rates. So as interest rates have gone up, their financial performance has improved and which has flowed through into higher dividends. And finally, on the last of the largest rises, IGO, they've had a really strong couple of years in terms of commodity prices and have built themselves a really robust balance sheet.
During reporting season, they just flagged that they'd be looking to return a little bit more of that capital back to shareholders. In terms of the largest falls, JB Hi-Fi and Ampol actually are probably on there as a technicality. Both of those companies are in really strong financial health, trading really well. But in FY 2021, they... Sorry, FY 2022, they paid a special dividend. So the underlying dividend is still strong. That's just the technicality that they're on the largest falls there. Infomedia, that is a high-growth business which paid, used to pay a really high dividend, but they've decided to cut that payout ratio and redirect into a little bit more growth in the business. So we don't see that dividend cut as being anything for concern.
But, I guess the one, and Kieran did talk about Domino's, that was one where we look at the dividend cut as being signaling that there is, you know, some tough times for them. As Kieran flagged, they'd had a tough period coming out of COVID. The balance sheet's been stretched, and that's forced them to reduce their dividends. So that's, that is certainly a case where we're taking that dividend as a signal of the underlying health of the business. But yeah, as we said, pleasingly, the large majority of our holdings have increased their dividends. I'll now turn back to Kieran for some comments on the outlook.
Thank you, Stu. So first, looking at the outlook as it's presented by the companies that we're invested in, so what we gleaned from the most recent reporting season. The two key themes are the same as they've been for the last 12-18 months. That's the two I words, inflation and interest rates and the interplay between those. But I guess what I would say is, what we're seeing is conditions are evolving here. Things are changing somewhat. So I guess as it relates to interest rates, it was very apparent looking through the financial statements that, interest rates are real. Money costs something again, and companies with variable debt and relying on financial providers are seeing that reflected in the interest costs that they're incurring in their business.
Interestingly, though, when you think about how interest rates are relating to the actual demand and the revenue that companies are generating, I think most are quite surprised at the resilience we've seen in the economy broadly. So there's a sense of, you know, there must still be something coming in terms of some slowdown, but... to date, you know, but I guess as presented by the slides Stuart just spoke to in the dividends we've seen, but just the company's reports that we saw through our portfolio, conditions were broadly pretty good, and surprisingly so. In terms of inflation, again, it's becoming more mixed. Anyone who's trying to do something from a capital expenditure point of view, trying to grow their business, particularly companies in the resources sector, are facing very significant cost overruns.
I think that really relates to just the scarcity of people, you know, to deliver on those projects. But interestingly, in other parts of the supply chain, in normal operations, we're seeing things ease somewhat. You know, so some of those really elevated freight rates and some of the particularly sharp pressures that companies were facing 12 months ago, now those conditions are starting to normalize somewhat. And wages, there's no doubt that's the most sticky part of the inflation picture. It's seeing inflation remain elevated. They still are higher than they have been for a number of years, but we're seeing some green shoots there because there is a bit of an availability of labor improvement.
So hopefully, that will flow through to just keeping a cap on that wage inflation and keeping businesses, you know, and their margins and their profitability quite strong going forward. In terms of how this relates to the future growth of companies, we think we'll see a shift in the way particularly revenue is being generated. So that really sharp inflation we saw in the last 12-18 months, in a way that has actually flattered some of the revenue growth we've seen. As companies that do have pricing power, I guess, pass on the cost pressures they're feeling, it looks like they're growing faster than they are. We think as that settles down somewhat, the key factor behind growth will again be about the volume of things you're selling and not, you know, the price that you're passing through.
And we think that will be a bit of a recalibration for people of just how fast companies are growing. And it's something we're mindful of with some of the valuation that we're seeing for some growth companies, which I'll touch on, on the following slide. And as Stuart mentioned, and not surprisingly, it's still quite a murky picture for companies. So if you don't really have to give quantitative profit guidance, I mean, I think it's pretty wise not to in this environment. So it'll be interesting to see, you know, whether that does return to normal again, or whether we're through, we're going through a pretty sustained period of, I guess, more qualitative than quantitative profit guidance statements from companies.
So my final slide, and looking at how this relates to the portfolio outlook and how we're taking this information and our view of valuation in the market and investing your money currently. So again, we're seeing those highest growth, highest quality companies, the sorts of businesses you really wanna own for the next 10+ years, looking pretty prohibitively expensive again. So we're mindful of that. You know, I guess the price you pay for an asset is always a very key factor in the return you'll subsequently get. So we need to be patient in thinking about when to add to those favored holdings. We've actually seen some instances in that second line there, where we've had companies that are, you know, well in our top 20, that we have seen, you know, pretty stretched in their valuation.
So what we've been doing with those is writing call options against them. So just to explain that, essentially that means we hold the shares and we pick a price around 10% above the current share price and sell a contract to a counterparty that says, you know, by a certain date, normally three to six months out, if the shares have appreciated above, you know, that level we've set, you know, they have the right to buy those shares off us at a set price. So we've been able to do that. You generate income in doing so. And just last week, we had contracts in REA, Carsales, and Netwealth all exercised. So we've, I guess, trimmed our holding, collected the option premium, and also reduced the holding to put some of that money into some other opportunities.
So where are they currently? As we're stating on the slide, we're looking for things that we think just represent better relative medium-term value. So these aren't things that we think are going up the most in the next six months, but the things that we think when you look back in three to five years, you know, we'll be thankful that we've been putting our money into these areas of the market. Where we've recently found them, IDP, I mean, perversely, this is actually one of the best companies. It probably fits into the earlier category of a great company with great growth prospects, but it's had a recent temporary issue around losing their monopoly status for English language testing into the Canadian market. We just don't think people will be talking about that in three years.
They'll be talking again about the, you know, significant market share this company's capturing in placing students, international students into universities in Western markets. We think there's daylight second in terms of their competition, and they're really pulling away, and we think it's quite a compelling story in terms of their market share over the next 5-10 years. So it's a really good opportunity at the moment. The second category we're calling Resilient Income. There's a couple of new holdings to the portfolio here, the first being Ampol. That might look a little bit curious, I guess, with the energy transition that's going on, but we just think there's a couple of factors here where we think value has presented itself.
We think the market is taking a view that, I guess, putting petrol in cars is yesterday's news, and, you know, this is a sunset industry, and these assets will be stranded. I think that probably will happen, but it's, it's more of a 15-20-year story than a 2-3-year story, so we think the market might have exaggerated that effect. We also think that people aren't looking at the, I guess, the strategic infrastructure assets this company has, which includes the refinery. Australia now is only a couple of refineries left. The government's realized that. They've now put a mechanism in place where they will support returns for these refineries next time they're at the bottom of the cycle. We think that's a really interesting signal.
And also with Ampol, we've observed in offshore markets as the, I guess, the focus on retail petrol and diesel declines, they'll put more energy into their convenience offering, and there's some really strategic locations they have for that. So we think like all these good companies, they don't stand still in the face of structural change, and we're seeing the company adapt really well. Regional and neighborhood real estate investment trusts and shopping centers, they're anchored by typically Coles and Woolies. Again, really good income coming out of this. It's a very defensive asset. It's under pressure now because interest rates are going up, but we think as long as they don't keep rapidly rising, there's now value in these assets. And we think it's a really resilient business that's well run. We found some resource companies recently that we've been buying.
This is companies that we've been reasonably underweight, that is, are well placed to benefit from energy transition. So the first being Lynas Rare Earths. This is the largest scale producer of rare earths outside of the Chinese market. We think that's a really strategic position to hold, as Western markets are understandably looking to diversify away from relying on China for these key rare earth inputs. And we like the fact that Lynas have a really good growth story. They can double production off their current mining footprint, and importantly, they're actually producing rare earths. There's lots of aspiring new players in this market, but it's a very finicky set of products to produce. You need to have expertise to do so, and Lynas have crossed that bridge already, so we think that's put them in a really good place going forward.
IGO used to be called Independence Group. This business has shifted quite a lot over the last five years. They bought into what is the best, lithium mine in the world, really strategically and really well-timed a number of years ago. That mine's called Greenbushes. They own part of that. It's the lowest cost operator in the world. We've seen lithium go up a lot, but come down quite a bit in the last three to six months. And this is one we've been keeping an eye on, and we've seen an opportunity to now take a position in that. It's producing good cash, even at these lower lithium prices. And while we have been underweight lithium, it's, there's no doubt on a 10-20-year view, electric vehicles are growing, and it's a good commodity to have some exposure to.
The next category is some underappreciated asset value. Another new holding called Cobram Estate. This is Australia's largest olive oil producer. I'm sure many of you would have jars of this in your cupboard at home. Again, the best time to buy agricultural assets is when you've had some sort of production hiccup. Had a poor season last year. That gets factored into the share price, but it doesn't relate to how you go next year and for years beyond. So we think that's created a source of value. The other interesting source of value is that they've been operating in the U.S. market for 10 years. They're only just getting to a point where they're making some money over there now, and that's not really factored into the valuation either.
So we think there are two good elements to say that we're buying that well. EVT is a long-standing holding. This is a curious one to us. They've got really good operating businesses in cinema, hotels, and the Thredbo Resort. Yet the shares are trading at less than what all the property that they own is worth, so they're not getting a lot of credit for those operating businesses. We think they've been through some really checkered times with COVID, but they're running those assets really well, so we think that's a really good value opportunity at the moment. And finally, again, we're always on the lookout for those new companies that are coming along, the smaller ones, the less discovered micro caps. Janison Education is a business that has a technology platform for education providers around the world.
So they what they do in the Australian market, one of their operations is the NAPLAN testing. So they provide the IT infrastructure for those tests. They've won interesting new contracts recently with Cambridge and Oxford to roll out some of their testing on a digital basis going forward, which we think will take some time to come through the business. But again, on a 3-5 year view, we think they're well set up for that. So I'll leave it there, and as I mentioned earlier, this could be a good slide, this one in the top 20, to have up when we ask for some questions from the floor around the portfolio. I'll leave it with you. Thank you.
Thanks, Kieran. Thank you, Mark. Thank you, Andrew, Kieran, and Stuart. I think we will go to questions now on this item, so if you could please submit them via the online platform or raise your hand if you're in the room, and thank. Yes, sir.
Thank you. Just a question regarding ResMed and Fisher & Paykel. I think from your portfolio at 30 June, Fisher & Paykel and ResMed were in the top 10. At the end of August, I think ResMed's disappeared from the top 20. Just wondering if you've got concerns about the obesity drugs that we're reading a lot about in the press at the moment? Yeah, look, it's a very astute question. It's good to see shareholders that are following these things closely. The first thing I'll say is that hasn't been the result of any sales of either company, so that really reflects the magnitude of underperformance we've seen in both since. So I guess to answer the question, do we have concerns?
Look, we have some concerns because it's definitely a shift in their long-term outlook, but then you've got to factor those concerns with what we think is now in the price. If we look at it through that lens, we have far less concern. We think, you know, there's a lot of thematic investing that's come into this. We've seen a lot of, you know, short selling of people that are seen as being victims of a shift in the market. You know, we think that'll play out over a longer period of time.
So we're watching it very closely, but we think, you know, in terms of the broader businesses, you know, their positions in their market, their ability to still capture new patients coming in, even if it is at a reduced level, we think the valuation of both looks much better than it did now. And interestingly, with ResMed, it's one of these holdings where it's now in the 50 Leaders, so it's not strictly a midcap company anymore. We have a setting in our portfolio that we don't automatically sell when they go into the 50 Leaders, but we don't buy any more. We're sort of holding them to work out the best time to sell them.
That's probably not the case now for ResMed, but I think if we were able to buy some more, we'd be very closely looking at it right now, but it's one we can't buy because it's a 50 leader company.
Geoff, do we have any questions?
Yeah, we've got a few here, Greg. I'll go through them, a couple of them before we go back to the floor, perhaps. So the first question is from the ASA Company Monitor, Steve Emerick. "Mirrabooka has achieved significantly better relative investment performance over the periods of 1-10 years than its stablemates. What are the underlying reasons for this?" And I think you probably covered a bit of this in the presentation, but perhaps, Kieran, you can answer this question.
Yeah, look, I don't think it's sort of comparing them. You know, it's probably not something I would do, Geoff, but I'd just go back to the reasons why we think there's good returns to generate from this part of the market. And it comes with risk. As I said, you know, we've had investments in this portfolio that are in those numbers that have been very poor on an individual basis. But when you've got a process set up to sort of scale the market and look for the best opportunities, we think there is the ability to capture some really good returns in companies that, you know, lots of market participants are looking at. So that's the main factor, but you've got to really know what you're doing, and you've got to have experience and expertise in doing that.
Thankfully, the track record is there at the moment.
Thanks, Kieran. I'll throw this one to Mark. There's a question here, Mark, we received prior to the AGM, was: "With the increasing popularity of ETFs and the normalization of interest rates, what future do you see for LICs, and more importantly, competition for funds under management?
Yeah, okay. Well, look, there's certainly ETFs have grown in popularity, but there is always a difference between, I guess, what I would see as the more traditional LICs. There's been a lot of new LICs come onto the market over the last few years, but you really have to get into the detail in terms of the way they're run, in particular, things like the fee structures. You know, the four LICs we run are more old school in terms of there's no separate management group. It's just cost recovery. That's very different to some of the new LICs that have come onto the market, where there is a fund manager taking fees and performance fees. As we outlined earlier, we don't charge.. There's no, well, there's no performance fee paid. There's obviously transparency with the LICs.
We are aware of the impact of tax in terms of the turnover, so we're very attuned to what you, the investor, gets at the end of the day. We have, you know, a board of directors that oversee the activities of the company, and we think that provides an element of trust in what we do. And when you look at the performance of Mirrabooka, it's been very good, and it's certainly significantly outperformed any ETF you would get on this sector of the market. So, it is active management, even though it's not high activity in terms of turnover. So there's many elements that go to why an LIC structure, if it's a well-run company and you've got good people running it, then the structure is good.
There, as we saw with the earlier chart, when you look at the share price and the NTA, it does move around, and there is a cycle to it as well. We always encourage investors or potential investors, if you're looking to transact, we put out that NTA every month, so you've got a very clear view of where that share price sits in relation to fair value or the NTA. If you've got awareness around that and there's good time to buy, well, then, you know, if you're buying at or below NTA, then ultimately you're getting the performance that the team delivers. Yeah, there's plenty of advantages still in the LIC structure, but you've really got to look into the detail of it.
Thanks, Mark. While we're with you, there's another question I'll direct to you. How about offering shareholders a share purchase plan? The last one we did was back in April 2022, so.
Yeah, so we have done regular share purchase plans, but I mean, there's a number of factors that come into our decision around that. You know, one is what are we gonna do with the money? We don't just raise money for the sake of it, and certainly, the past couple of share purchase plans, Kieran and Stuart have done very clear papers saying why they think this is a good time to be raising money. And certainly, the questioning from the board is: Why do we need to raise money? Because, once again, we're not a traditional fund manager, that the more funds we have, the more fees we get. We don't operate like that because we don't have any fees.
So, actually, getting bigger can sometimes restrict our ability to take advantage of opportunities, so but there's no urgency for us to get bigger at all. So it's about where are the opportunities and what the team could really do with that money. And then we also consider where the share price is around the NTA, and do we think there's interest from shareholders? So there's a lot of factors that go into that, and we wanna make sure that we're doing the right thing by shareholders when we make a decision to do a share purchase plan.
Thanks, Mark. We did put quite a lot of commentary about Environmental, Social, Governance and how we look at it in terms of managing the portfolio in the annual report. So I've got a question here which covers probably a little bit of that. So how do we look at ESG in terms of the portfolio? And probably two contrasting views around it.
...The first is about the effects of climate change. Now they're becoming more rapidly and more obvious concerning, are the companies in the portfolio responding to these challenges with sufficient urgency? And I guess the other side of this, coin is, does Mirrabooka look at the beneficial impact of fossil fuel investors to the positive lifestyle of important Asian neighbors, China and India? So I'll throw that to you, Kieran.
Thanks, Jeff. So I guess the first comment I'd make is we're not holding ourselves out as an ESG fund. There are now many of those in the market. So for people that are really looking to, I guess, pursue that line of thinking, you know, that's not us. And there's a, there's a whole other level of research that goes into being an ESG fund. You can't just call yourself that. You need to actually deliver on that and really understand the broad range of issues of the companies that are in your portfolio, if that's what you're doing. Now, having said that, we're a long-term investor, so one of the key factors we consider when we're investing in a company is its long-term sustainability. Now, that's a factor that we give a score to for every company that we invest in.
So really, having that in place and being a long-term investor means that we're not getting in and out of things where we can think we can make a dollar for a while before people notice some of the harm they're doing, or, you know, being long-term really does resolve some of these issues. Because if you're gonna be in a company for the long term, you know, the world's very focused on, you know, the way these companies are operating, their impact on the environment, and in much, you know, broader social aspects. They're gonna get caught out if, you know, they're not considering, you know, these factors and operating accordingly. So that means that when we screen our portfolio for how it looks from a emissions intensity and a number of other factors, you know, it looks good.
But as I said, it's not something we're setting out to do as a pure ESG fund. Yeah, so that, that's the way we're looking at it.
Thanks, Kieran. Got one final question online. Greg, so PwC has been Mirrabooka's auditor for a long time. The Australian Shareholders' Association recommends tendering the audit every 12 years. Given the recent, publicized events around regarding PwC, will Mirrabooka put their audit out to tender?
I think we last tendered in 2017.
Correct.
Right.
The partnership partner changed last year.
Yep.
We probably tend to do it every 10 years, don't we?
Without guaranteeing the future, that would be something we'd look at in 2020.
It's something that's also under review on a regular basis.
Yeah.
Thanks, Greg. I've got no more questions from online or I notice any more questions from the floor, but... Okay, if there are no more questions, and bear in mind, we'll mix with the shareholders afterwards, so we can always have a chat on a more informal basis. We'll move on. So in a couple of minutes, I will close the voting system. Please ensure that you have cast your vote on all resolutions, and for those in the room, may I now ask you to complete your voting card? Computershare staff will collect your voting card at the end of the meeting. I would like to thank shareholders for your continued support and for the interest you've shown in the affairs of the company by your attendance in person and online today.
Shareholders are reminded that the team will be holding shareholder meetings in Adelaide, Perth, Canberra, Brisbane and Sydney during March next year. Okay, so I think just confirm that online voting is now closed. The results of these votes will be released as soon as practicable to the ASX later today. I now declare the meeting closed, and for those in the room, we have some refreshments available. Thank you.