Q4 2026 MFF Capital Investments Ltd Earnings Call

August 13, 2026

Speaker #1: Good morning, everyone, and thank you for joining us. I'm Gerald Stack, CEO of MFF Group, and I'm joined by Chris McKay, MFF's Portfolio Manager.

Gerald Stack: Good morning, everyone, and thank you for joining us. I am Gerald Stack, CEO of MFF Group, and I am joined by Chris Mackay, MFF's Portfolio Manager and Executive Director of Investment and Capital. Let me start by giving an overview of how today's briefing will run. I will begin with an overview of our business, a reminder of our key investment objectives and approach, and an update on our recent financial performance. I will then hand over to Chris, who will take you through an update on MFF's portfolio. After Chris has discussed the portfolio, I will share some thoughts on MFF's outlook, which will bring the formal presentation to a close. We will then move to shareholder questions, which you are welcome to submit at any time during the webinar via the Live Q&A tab on the right-hand side of your screen. All right. Let's start with the business overview.

Speaker #1: And Executive Director, Investment and Capital. Let me start by giving an overview of how today's briefing will run. I'll begin with an overview of our business, a reminder of our key investment objectives and approach, and an update on our recent financial performance.

Speaker #1: I'll then hand over to Chris, who will take you through an update on MFF's portfolio. After Chris has discussed the portfolio, I'll share some thoughts on MFF's outlook, which will bring the formal presentation to a close.

Speaker #1: We'll then move to shareholder questions, which you're welcome to submit at any time during the webinar via the live Q&A tab on the right-hand side of your screen.

Gerald Stack: We will then move to shareholder questions, which you are welcome to submit at any time during the webinar via the Live Q&A tab on the right-hand side of your screen. All right. Let's start with the business overview.

Speaker #1: All right, let's start with the business overview. As we note, MFF's overarching aim is to build lasting wealth for shareholders, primarily through long-term ownership of advantaged businesses.

Gerald Stack: As we note, MFF's overarching aim is to build lasting wealth for shareholders, primarily through long-term ownership of advantage businesses. Today, MFF is one of Australia's largest investment companies, with market capitalization of more than AUD 3 billion. MFF has a long-term track record of compounding capital with net assets after allowing for tax on unrealized gains growing from AUD 412 million at 30 June 2013, to more than AUD 2.5 billion at 30 June 2026. In addition to capital growth, shareholders have benefited from growing dividends over time. Dividends are 100% franked, and MFF has substantial franking credits and profit reserves available for future dividends. The transition of the operating model over the last year provides MFF with a strong platform for sustainable long-term growth. On page 2, we outline our objectives and approach.

Speaker #1: Today, MFF is one of Australia's largest investment companies, with a market capitalization of more than $3 billion. MFF has a long-term track record of compounding capital, with net assets, after allowing for tax on unrealized gains, growing from $412 million at 30 June 2013 to more than $2.5 billion at 30 June 2026.

Speaker #1: In addition to capital growth, shareholders have benefited from growing dividends over time. Dividends are 100% franked, and MFF has substantial franking credits and profit reserves available for future dividends.

Speaker #1: The transition of the operating model over the last year provides MFF with a strong platform for sustainable, long-term growth. On page 2, we outline our objectives and approach.

Speaker #1: MFF has two objectives: to maximize compound risk-adjusted after-tax returns and to minimize the risk of permanent capital loss. Our investment approach is unconstrained, with flexible capital allocation allowing adaptation to evolving investment markets and opportunities.

Gerald Stack: MFF has two objectives: to maximize compound risk-adjusted after-tax returns and to minimize the risk of permanent capital loss. Our investment approach is unconstrained, with flexible capital allocation allowing adaptation to evolving investment markets and opportunities. It is disciplined with a focus on opportunity cost, business quality, and value, and it is long-term, with an investment mindset that favors duration and the benefits of compounding. Page 3 provides a snapshot of the key financial outcomes for financial year 2026. Allowing for mark to market of the investment portfolio, MFF generated AUD 225 million of net profit before tax, AUD 160 million of net profit after tax. We paid taxes of AUD 119.5 million and received AUD 38 million of dividends and distribution income.

Speaker #1: It is disciplined, with a focus on opportunity cost, business quality, and value, and it is long-term, with an investment mindset that favors duration and the benefits of compounding.

Speaker #1: Page 3 provides a snapshot of the key financial outcomes for financial year 2026. Allowing for mark-to-market of the investment portfolio, MFF generated $225 million of net profit before tax.

Speaker #1: $160 million of net profit after tax. We paid taxes of $119.5 million and received $38 million of dividends and distribution income. Investment assets were valued at nearly $3 billion at 30 June 2026, and after accounting for net deferred tax liabilities of $432 million, the net assets of the MFF Group totaled $2,523 million, or $2.5 billion.

Gerald Stack: Investment assets were valued at nearly AUD 3 billion at 30 June 2026, and after accounting for net deferred tax liabilities of AUD 432 million, the net assets of the MFF Group totaled AUD 2,523 million, AUD 2.5 billion. Page 4 reviews medium to long-term shareholder returns. While we are pleased with the outcomes delivered this year, our focus is, and always has been, on sustained growth in capital and in dividends over the medium to longer term. The chart on page 4 sets out three indicators of shareholder returns. MFF pre-tax NTA with tax reinstated, MFF post-tax NTA, and share price total shareholder return. All three measures shown on the chart highlight MFF's history of prudent and disciplined capital allocation. MFF pre-tax NTA tax reinstated shows the performance of the investment portfolio before the impact of tax. We note that approximately AUD 513 million of tax was paid over the 10-year period.

Speaker #1: Page 4 reviews medium- to long-term shareholder returns. While we're pleased with the outcomes delivered this year, our focus is, and always has been, on sustained growth in capital and in dividends over the medium to longer term.

Speaker #1: The chart on page 4 sets out three indicators of shareholder returns: MFF pre-tax NTA (with tax reinstated), MFF post-tax NTA, and share price total shareholder return.

Speaker #1: All three measures shown on the chart highlight MFF's history of prudent and disciplined capital allocation. MFF pre-tax NTA (tax reinstated) shows the performance of the investment portfolio before the impact of tax.

Speaker #1: We note that approximately $513 million of tax was paid over the 10-year period. MFF post-tax NTA shows the performance of the investment portfolio after the impact of tax.

Gerald Stack: We note that approximately AUD 513 million of tax was paid over the 10-year period. MFF post-tax NTA shows the performance of the investment portfolio after the impact of tax. Share price total shareholder return shows the total shareholder return over time based on the change in the MFF share price and the dividends received by shareholders. For each of these measures, we assume that dividends are reinvested in MFF shares. As I noted, all three measures shown on the chart highlight MFF's history of prudent and disciplined capital allocation. Page 5 shows the annual dividends declared by MFF from financial year 2021 through to today. Over that 5-year period, dividends per share have grown at a compound annual growth rate of 26%.

Gerald Stack: MFF post-tax NTA shows the performance of the investment portfolio after the impact of tax. Share price total shareholder return shows the total shareholder return over time based on the change in the MFF share price and the dividends received by shareholders. For each of these measures, we assume that dividends are reinvested in MFF shares. As I noted, all three measures shown on the chart highlight MFF's history of prudent and disciplined capital allocation. Page 5 shows the annual dividends declared by MFF from financial year 2021 through to today. Over that 5-year period, dividends per share have grown at a compound annual growth rate of 26%.

Speaker #1: And share price total shareholder return shows the total shareholder return over time, based on the change in the MFF share price and the dividends received by shareholders.

Speaker #1: For each of these measures, we assume that dividends are reinvested in MFF shares. As I noted, all three measures shown on the chart highlight MFF's history of prudent and disciplined capital allocation.

Speaker #1: Page 5 shows the annual dividends declared by MFF from financial year 2021 through to today. Over that five-year period, dividends per share have grown at a compound annual growth rate of 26%.

Speaker #1: The dividend for the most recent half-year, the half-year ended 30 June 2026, has been set by the MFF board at $0.11 per share. The board has also noted its intention to increase the rate of the half-year dividend to $0.12 per share for the half-year ending 31 December 2026.

Gerald Stack: The dividend for the most recent H1, the H1 ended 30 June 2026, has been set by the MFF board at AUD 0.11 per share. The board has noted its intention to increase the rate of the half-year dividend to AUD 0.12 per share for the half-year ending 31 December 2026. MFF is well-placed to continue to pay fully franked dividends to shareholders with retained profits of nearly AUD 1.8 billion and with franking credits available for future dividends of AUD 272 million, equivalent to AUD 0.454 per share. With that, I will hand over to Chris.

Speaker #1: MFF is well placed to continue to pay fully franked dividends to shareholders, with retained profits of nearly $1.8 billion and franking credits available for future dividends of $272 million, equivalent to 45.4 cents per share.

Speaker #1: And with that, I'll hand over to Chris.

Speaker #2: Excellent. Thanks very much, Gerald. Obviously, the return of Toy Story is fitting for many financial markets. They're priced for perfection—priced to Mars. To infinity and beyond.

Chris Mackay: Excellent. Thanks very much, Gerald. Obviously, the return of "Toy Story" is fitting for many financial markets. They are priced for perfection, priced to Mars, to infinity and beyond. Beyond the specifics today, two emblems are recurrent for people to consider. The joys and risks of markets, particularly spot markets that are extrapolated, and secondly, margins of safety. We can come back to that during the Q&A. The page on the slide of the 10-year outcomes indicates that MFF has an extremely solid base, frameworks, and processes that have been successful, and no excuses going forward. We are optimistic about the opportunities ahead, but even more wary about risk factors and market pricing. I will come to that. Currently, we have absolutely fantastic business performances by many of our companies. However, we now have even fewer mouthwatering opportunities from years and decades past. MFF, it is differentiated.

Speaker #2: Beyond the specifics today, two emblems are recurrent for people to consider: the joys and risks of markets, particularly spot markets that are extrapolated; and secondly, margins of safety.

Speaker #2: We can come back to that during the Q&A. The page on the slide of the 10-year outcomes indicates that MFF has an extremely solid base: frameworks and processes that have been successful, and no excuses going forward.

Speaker #2: We're optimistic about the opportunities ahead, but even more wary about risk factors and market pricing. I'll come to that. Currently, we have absolutely fantastic business performances by many of our companies.

Speaker #2: However, we now have even fewer mouthwatering opportunities from years and decades past. MFF, it's differentiated. I would argue that a key factor is what we don't do.

Chris Mackay: However, we now have even fewer mouthwatering opportunities from years and decades past. MFF, it is differentiated. I would argue that a key factor is what we do not do. MFF can screen out 99% of market prices and businesses. We do not chase momentum. We make a small number of choices and never have to make decisions under pressure. Mistakes are ours, not forced by outside influences. We have been selective in terms of quality companies at attractive valuations, where over much of recent decades, profitable growth has been favored by markets. At our core, we aim for businesses that sustain for the long term. We are extremely risk-conscious, and our concerns are raised as company after company are chasing growth for its own sake, many misleading the market about their potential and hiding risks.

Chris Mackay: I would argue that a key factor is what we do not do. MFF can screen out 99% of market prices and businesses. We do not chase momentum. We make a small number of choices and never have to make decisions under pressure. Mistakes are ours, not forced by outside influences. We have been selective in terms of quality companies at attractive valuations, where over much of recent decades, profitable growth has been favored by markets. At our core, we aim for businesses that sustain for the long term. We are extremely risk-conscious, and our concerns are raised as company after company are chasing growth for its own sake, many misleading the market about their potential and hiding risks. Leverage and fraud rise as easy money is chased, and this time is no different.

Speaker #2: MFF can screen out 99% of market prices and businesses. We don't chase momentum. We make a small number of choices and never have to make decisions under pressure.

Speaker #2: Mistakes are ours, not forced by outside influences. We've been selective in terms of quality companies that attract evaluations. Over much of recent decades, profitable growth has been favored by markets.

Speaker #2: At our core, we aim for businesses that sustain for the long term. We're extremely risk conscious, and our concerns are raised as company after company are chasing growth for its own sake.

Speaker #2: Many are misleading the market about their potential and hiding risks. Leverage and fraud rise as easy money is chased, and this time is no different.

Chris Mackay: Leverage and fraud rise as easy money is chased, and this time is no different. Looking forward, we expect great opportunities, but risk management, patience, process, and discipline are required, as well as adaptability to respond objectively to business risk reward and market price changes. Risk management matters. We prefer lower prices for opportunities but need to wait. We have scale, but also extreme portfolio liquidity, and we are able to act quickly. We are a long-term investor, but we manage for risk and for future opportunities and sold and paid tax in the recent frothy markets. In contrast with our outstanding companies and innovations, various political, geopolitical, fiscal, and regulatory situations around the world are dreadful, meaning they are getting worse with material downside risks extending well beyond noise in markets.

Speaker #2: Looking forward, we expect great opportunities, but risk management, patience, process, and discipline are required, as well as adaptability to respond objectively to business risk-reward and market price changes.

Chris Mackay: Looking forward, we expect great opportunities, but risk management, patience, process, and discipline are required, as well as adaptability to respond objectively to business risk reward and market price changes. Risk management matters. We prefer lower prices for opportunities but need to wait. We have scale, but also extreme portfolio liquidity, and we are able to act quickly. We are a long-term investor, but we manage for risk and for future opportunities and sold and paid tax in the recent frothy markets. In contrast with our outstanding companies and innovations, various political, geopolitical, fiscal, and regulatory situations around the world are dreadful, meaning they are getting worse with material downside risks extending well beyond noise in markets. Difficult governments, political and geopolitical environments, however, cannot be used as excuses. Old-fashioned, practical, direct advice is to work smarter and to compound more if impacted by populist or socialist changes in taxes.

Speaker #2: Risk management matters. We prefer lower prices for opportunities, but need to wait. We have scale, but also extreme portfolio liquidity, and we're able to act quickly.

Speaker #2: We're a long-term investor, but we manage for risk and for future opportunities, and we sold and paid tax in the recent frothy markets. In contrast, while our outstanding companies lead in innovations, various political, geopolitical, fiscal, and regulatory situations around the world are dreadful.

Speaker #2: Meaning, they are getting worse, with material downside risks extending well beyond noise in markets. Difficult governments, political, and geopolitical environments, however, cannot be used as excuses.

Chris Mackay: Difficult governments, political and geopolitical environments, however, cannot be used as excuses. Old-fashioned, practical, direct advice is to work smarter and to compound more if impacted by populist or socialist changes in taxes. There is little room for sustainable return by governments to lower taxes. For example, dependency ratios and the mass of government interest costs doubling in the last five years. MFF's approach and processes are proof of concept. For each and every MFF investment and for the portfolio as a whole, MFF seeks compounding gains over time, and we are risk-conscious. We seek to avoid permanent losses of capital, make money over time, retain gains, and build upon them for the benefit of holders over rolling target periods of three to seven years.

Speaker #2: Old-fashioned, practical, direct advice is to work smarter and to compound more. If impacted by populist or socialist changes and taxes, there is little room for sustainable return by governments to lower taxes.

Chris Mackay: There is little room for sustainable return by governments to lower taxes. For example, dependency ratios and the mass of government interest costs doubling in the last five years. MFF's approach and processes are proof of concept. For each and every MFF investment and for the portfolio as a whole, MFF seeks compounding gains over time, and we are risk-conscious. We seek to avoid permanent losses of capital, make money over time, retain gains, and build upon them for the benefit of holders over rolling target periods of three to seven years. Many companies do not last the distance, and therefore our approach and our focus is differentiated in trying to find the businesses that are able to sustain for the longer term. But that is difficult as competition and innovation are relentless. Longer-term investing is simple to say, much harder to execute, particularly in markets that turn down.

Speaker #2: For example, dependency ratios and the mass of government interest costs have doubled in the last five years. MFF's approach and processes have proof of concept.

Speaker #2: For each and every MFF investment, and for the portfolio as a whole, MFF seeks compounding gains over time and we're risk conscious. We seek to avoid permanent losses of capital, make money over time, retain gains, and build upon them for the benefit of holders over rolling target periods of 3 to 7 years.

Speaker #2: Many companies do not last the distance, and therefore our approach and our focus is differentiated in trying to find the businesses that are able to sustain for the longer term. But that is difficult, as competition and innovation are relentless.

Chris Mackay: Many companies do not last the distance, and therefore our approach and our focus is differentiated in trying to find the businesses that are able to sustain for the longer term. But that is difficult as competition and innovation are relentless. Longer-term investing is simple to say, much harder to execute, particularly in markets that turn down.

Speaker #2: Longer-term investing is simple to say but much harder to execute, particularly in markets that turn down. MFF is also paying steadily increasing, fully franked dividends, as mentioned by Gerald.

Chris Mackay: MFF is also paying steadily increasing fully franked dividends, as mentioned by Gerald. Notwithstanding the dividends, you can have your own emotions about the slide showing our tiny company paying over AUD 500 million in taxes in a decade. MFF gets its best opportunities when markets are very wrong in assessing the value and potential of great businesses. Theory might say that markets are efficient, whereas for decades, participants have repeatedly acted against their own self-interest. Some say money is transferred from the impatient to the patient, but it goes far further. Robert Caro, the famous political biographer, was taught, "Turn every page," and that is a short film with the most famous publisher and editor, Robert Gottlieb. Warren in recent years adopted the phrase and clearly practiced it for decades. I am delighted that Gerald is our CEO.

Speaker #2: Notwithstanding the dividends, you can have your own emotions about the slide showing our tiny company paying over $500 million in taxes in a decade.

Speaker #2: MFF gets its best opportunities when markets are very wrong in assessing the value and potential of great businesses. Theory might say that markets are efficient, whereas for decades participants have repeatedly acted against their own self-interest.

Speaker #2: Some say money is transferred from the impatient to the patient, but it goes far further. Robert Caro, the famous political biographer, was taught, "Turn every page." That is also the title of a short film featuring the most famous publisher and editor, Bob Gottlieb.

Speaker #2: Buffett, in recent years, adopted the phrase and has clearly practiced it for decades. I am delighted that Gerald is our CEO. You may not be aware that he led the team to build a $20 billion infrastructure funds business at Magellan.

Chris Mackay: You may not be aware that he led the team to build a AUD 20 billion infrastructure funds business at Magellan. When we were chatting years ago about teaming up, he calmly took me through his and his team's analysis of Sydney Airport. He correctly identified how materially underpriced it was and its prospects to compound in value for years with very moderate business risk. In my earlier life working for a living, my firm underwrote 100 or so capital raisings a year or about two a week for many billions of dollars. Judgment of risk was real, not only leading up to and during the dot-com and tech infrastructure booms. There are important differences between the two that can be covered in Q&A if relevant to today. A small number had shortfalls, and the predecessor to Sydney Airport was one.

Speaker #2: When we were chatting years ago about teaming up, he calmly took me through his and his team's analysis of Sydney Airport. He correctly identified how materially underpriced it was and its prospects to compound in value for years with very moderate business risk.

Speaker #2: In my earlier working life, working for a living, my firm underwrote about 100 capital raisings a year, or roughly 2 a week, for many billions of dollars.

Speaker #2: Judgment of risk was real, not only leading up to and during the Q4 and the dot-com and tech infrastructure booms. There are important differences between the two that can be covered in Q&A if relevant to today.

Speaker #2: A small number had shortfalls, and the predecessor to Sydney Airport was one. I met with the Macquarie leadership, who were very sensible, measured, and rational in their response.

Chris Mackay: A small number had shortfalls, and the predecessor to Sydney Airport was one. I met with the Macquarie leadership, who were very sensible, measured, and rational in their response. I was amazed that institutions and other investors had not taken every opportunity to buy this, and it became valued by the market at more than 8 times some years later, when privatized. The same institutions that a few years before were desperate to buy soon-to-be-bankrupt dot-coms. It is not just the index that is irrational. On top of that, in their own risk management, Macquarie leadership rejected the in vogue, "Value at Risk" model for a constant analysis of what maximum losses were if a series of worst cases occurred rather than an even theoretical distribution. Shortly afterwards, risk management became crucial in the GFC.

Chris Mackay: I met with the Macquarie leadership, who were very sensible, measured, and rational in their response. I was amazed that institutions and other investors had not taken every opportunity to buy this, and it became valued by the market at more than 8 times some years later, when privatized. The same institutions that a few years before were desperate to buy soon-to-be-bankrupt dot-coms. It is not just the index that is irrational. On top of that, in their own risk management, Macquarie leadership rejected the in vogue, "Value at Risk" model for a constant analysis of what maximum losses were if a series of worst cases occurred rather than an even theoretical distribution. Shortly afterwards, risk management became crucial in the GFC. We are now wary of counterparty risk and of businesses chasing growth without understanding risk. Insurance and lending currently are obvious.

Speaker #2: I was amazed that institutions and other investors had not taken every opportunity to buy this, and it became valued by the market at more than eight times some years later, when privatized.

Speaker #2: The same institutions that, a few years before, were desperate to buy soon-to-be-bankrupt dot-coms. So, it's not just the index that's irrational.

Speaker #2: On top of that, in our own risk management—sorry, in their own risk management—Macquarie leadership rejected the in-vogue “value at risk” model for a constant analysis of what maximum losses were in a series of worst cases, if a series of worst cases occurred, rather than an even theoretical distribution.

Speaker #2: Shortly afterwards, risk management became crucial in the GFC. We're now wary of counterparty risk and of businesses chasing growth without understanding risk. Insurance and lending currently are obvious.

Chris Mackay: We are now wary of counterparty risk and of businesses chasing growth without understanding risk. Insurance and lending currently are obvious. In the words a few weeks ago of one of the great insurance CEOs, "US commercial insurance risks are finding pricing in terms outside of the US, not because of a lack of capacity," and we know how that always ends. Similarly, an Australian private credit fee taker was quoted recently as saying, "Who would have known?" Let us turn to structure. Structure influences processes. We do not have excessive debt. We are currently about 15% or so less invested than our mid-cycle rough rule of thumb being 10% borrowed. We do not have outflow redemptions, margin calls, and the like, and we have no excuses when quality bargains are around.

Speaker #2: In the words a few weeks ago of one of the great insurance CEOs, "U.S. commercial insurance risks are finding pricing and turns outside of the U.S." Not because of a lack of capacity, and we know how that always ends.

Chris Mackay: In the words a few weeks ago of one of the great insurance CEOs, "US commercial insurance risks are finding pricing in terms outside of the US, not because of a lack of capacity," and we know how that always ends. Similarly, an Australian private credit fee taker was quoted recently as saying, "Who would have known?" Let us turn to structure. Structure influences processes. We do not have excessive debt. We are currently about 15% or so less invested than our mid-cycle rough rule of thumb being 10% borrowed. We do not have outflow redemptions, margin calls, and the like, and we have no excuses when quality bargains are around. We have duration on our side. We can and have held businesses for a decade or more as business value compounds.

Speaker #2: Similarly, an Australian private credit fee taker was quoted recently as saying, "Who would have known?" Let's turn to structure. Structure influences processes. We don't have excessive debt.

Speaker #2: We are currently about 15% or so less invested than our mid-cycle rough rule of thumb, being 10% borrowed. We don't have outflow redemptions, margin calls, and the like.

Speaker #2: And we have no excuses when quality bargains are around. We have duration on our side. We can, and have, held businesses for a decade or more as business value compounds.

Chris Mackay: We have duration on our side. We can and have held businesses for a decade or more as business value compounds. A core principle is that superior long-term shareholder returns follow sustained superior returns on capital, profitability, and cash flows if the purchase and holding prices are satisfactory or better. Sustained profitable growth has been beyond historical precedent for some of our portfolio companies, and we can discuss in Q&A. We have three broad categories. Firstly, advantaged high return on invested capital, cash-generating businesses with sustainable advantages. Ideally, they have already won in their markets and with additional scale and roll-outs, adjacencies or flywheels, and other profitable growth levers. Ideally, with billions of habitual customers, as is the case for a number of our companies in our portfolio.

Speaker #2: A core principle is its superior long-term shareholder returns for, like, sustained superior returns on capital, profitability, and cash flows, if the purchase and holding prices are satisfactory or better.

Chris Mackay: A core principle is that superior long-term shareholder returns follow sustained superior returns on capital, profitability, and cash flows if the purchase and holding prices are satisfactory or better. Sustained profitable growth has been beyond historical precedent for some of our portfolio companies, and we can discuss in Q&A. We have three broad categories. Firstly, advantaged high return on invested capital, cash-generating businesses with sustainable advantages. Ideally, they have already won in their markets and with additional scale and roll-outs, adjacencies or flywheels, and other profitable growth levers. Ideally, with billions of habitual customers, as is the case for a number of our companies in our portfolio. Profitable growth has been a massive performance differentiator since the GFC, with globalization, technology, and financialization being obvious additional drivers. We continue to favor this, subject in part to interest rates remaining controlled. Again, an area we can touch on in Q&A.

Speaker #2: Sustained profitable growth has been beyond historical precedent for some of our portfolio companies, and we can discuss this in the Q&A. We have three broad categories.

Speaker #2: Firstly, advantaged, high return on invested capital, cash-generating businesses with sustainable advantages. Ideally, they have already won in their markets, and with additional scale and rollouts, adjacencies, or flywheels and other profitable growth levers.

Speaker #2: Ideally, with billions of habitual customers as is the case for a number of our companies in our portfolio, profitable growth has been a massive performance differentiator since the GFC, with globalization, technology, and financialization being obvious additional drivers.

Chris Mackay: Profitable growth has been a massive performance differentiator since the GFC, with globalization, technology, and financialization being obvious additional drivers. We continue to favor this, subject in part to interest rates remaining controlled. Again, an area we can touch on in Q&A. Also, even the highest quality companies move up and down in market prices 50% or so in a year. A recent study found that multi-decade sustained winners were only at record prices 7% of the time, but well below their previous peaks for 40% or 50% of the time. Thus, it is hard to hold even the best companies as market prices fall. Our second category is where we sometimes seek to invest in advantaged businesses that are more cyclical or lack the extraordinary network, geographic pricing power, or flywheel benefits of category 1.

Speaker #2: We continue to favor this subject, in part due to interest rates remaining controlled. Again, this is an area we can touch on in Q&A. Also, even the highest-quality companies can move up and down in market prices by 50% or so in a year.

Chris Mackay: Also, even the highest quality companies move up and down in market prices 50% or so in a year. A recent study found that multi-decade sustained winners were only at record prices 7% of the time, but well below their previous peaks for 40% or 50% of the time. Thus, it is hard to hold even the best companies as market prices fall. Our second category is where we sometimes seek to invest in advantaged businesses that are more cyclical or lack the extraordinary network, geographic pricing power, or flywheel benefits of category 1. Such investments work for decades and make most sense when they are out of favor and inexpensive. Our focus and duration give us perspective advantages compared to the market. We do a few of these and automatically compare buying or holding them with the opportunity costs of alternatives.

Speaker #2: A recent study found that multi-decade sustained winners were only at record prices 7% of the time, but well below their previous peaks for 40% or 50% of the time.

Speaker #2: Thus, it's hard to even hold the best companies as market prices fall. Our second category is where we sometimes seek to invest in advantaged businesses that are more cyclical, or lack the extraordinary network, geographic pricing power, or flywheel benefits of category one.

Speaker #2: Such investments work for decades and make most sense when they are out of favor and inexpensive. Our focus and duration give us perspective advantages compared to the market.

Chris Mackay: Such investments work for decades and make most sense when they are out of favor and inexpensive. Our focus and duration give us perspective advantages compared to the market. We do a few of these and automatically compare buying or holding them with the opportunity costs of alternatives.

Speaker #2: We do a few of these and automatically compare buying or holding them with the opportunity cost of alternatives. Thirdly, we may seek opportunistic absolute bargains for money-making where we perceive margins of safety.

Chris Mackay: Thirdly, we may seek opportunistic absolute bargains for money-making where we perceive margins of safety, particularly price to be so extreme that business quality risks appear to be covered massively. During the 1990s, there were plenty of these, including failed IPOs, panicked and forced index, and other sellers as they dump. Examples include low-growth consumer-type companies or oil producers. As I said earlier, spot pricing that is extrapolated gives opportunities. Businesses with regular demand but low growth through the cycle. We have been relatively inactive in this category but can see more dislocations. Just before we turn to the portfolio snapshot, I want to come back to Joel, is someone who I have never seen anyone get so excited by toll roads. He simply loves the unregulated toll road, in particular the 407 north of Toronto.

Speaker #2: Particularly, prices can be so extreme that business quality risks appear to be covered massively. During the '90s, there were plenty of these, including failed IPOs and panicked, forced index and other sellers as they dumped.

Speaker #2: Examples include low-growth consumer-type companies or oil producers. As I said earlier, spot pricing that is extrapolated gives opportunities. Businesses with regular demand but low growth through the cycle would have been relatively inactive in this category but can see more dislocations.

Speaker #2: Just before we turn to the portfolio snapshot, I want to come back to Gerald. He is someone—I’ve never seen anyone get so excited by toll roads.

Speaker #2: He simply loves the unregulated toll road, in particular the 407 north of Toronto. If anyone is looking for a family holiday, it is a great place to go driving up and down.

Chris Mackay: If anyone is looking for a family holiday, it is a great place to go, driving up and down. Of course, we love disguised, unregulated toll roads, and you will see a few in the portfolio. Can we turn to the portfolio snapshot, please? The portfolio construction means that all of the largest holdings have delivered mark-to-market gains, mostly well over AUD 100 million each. In that, if we include the three Singapore banks, DBS, UOB, and Oversea-Chinese, which is OCBC, as a single line, we have another well over AUD 100 million mark. A key issue in markets and for the portfolio is returns on invested capital. Sustained winners may be underpriced, as for example, they invest heavily in capital and operating expenses for future growth and may appear nominally expensive in current profit terms or based on a current measure of so-called free cash flow.

Speaker #2: Of course, we love disguised, unregulated toll roads, and you'll see a few in the portfolio. So, can we turn to the portfolio snapshot, please?

Speaker #2: The portfolio construction means that all of the largest holdings have delivered market to market gains mostly well over 100 million dollars each. In that, if we include the three Singapore banks, TBS, UOB, and overseas Chinese, which is OCBC as a single line, we have another well over 100 million dollar mark.

Speaker #2: A key issue in markets, and for the portfolio, is returns on invested capital. Sustained winners may be underpriced. For example, they invest heavily in capital and operating expenses for future growth and may appear nominally expensive in current profit terms or based on a current measure of so-called free cash flow.

Chris Mackay: Sustained winners may be underpriced, as for example, they invest heavily in capital and operating expenses for future growth and may appear nominally expensive in current profit terms or based on a current measure of so-called free cash flow. Some have rolled out expanded core businesses and adjacencies for years. Even experienced business analysts mistake expansion CapEx for much more limited stay-in business CapEx. In the current markets, there is also massive capital chasing 5% to 8% per annum returns and effectively unlimited money at 8% per annum. The hyperscalers in our portfolio won't be shy. Currently, their returns on incremental capital are far higher but will normalize. It is not yet played out who are the medium-term AI winners and losers, but there will be losers.

Speaker #2: Some have rolled out expanded core businesses and adjacencies for years. Even experienced business analysts mistake expansion capital expenditure for much more limited stay-in-business capital expenditure.

Chris Mackay: Some have rolled out expanded core businesses and adjacencies for years. Even experienced business analysts mistake expansion CapEx for much more limited stay-in business CapEx. In the current markets, there is also massive capital chasing 5% to 8% per annum returns and effectively unlimited money at 8% per annum. The hyperscalers in our portfolio won't be shy. Currently, their returns on incremental capital are far higher but will normalize. It is not yet played out who are the medium-term AI winners and losers, but there will be losers. Will core AI be competed away by a decent, cheaper, ubiquitous, open source AI services and LLMs or what model? Even within AI, there is commoditization cost reductions for the models, for innovations, and chips and other key inputs. In all cases, prices matter. Obviously, purchase prices, but also for holding and for selling.

Speaker #2: In the current markets, there is also massive capital chasing 5% to 8% per annum returns, and effectively unlimited money at 8% per annum. The hyperscalers in our portfolio won't be shy.

Speaker #2: Currently, their returns on incremental capital are far higher but will normalize. It's not yet played out who the medium-term AI winners and losers are, but there will be losers.

Speaker #2: Will AI be competed away by decent, cheaper, ubiquitous open-source AI services and LLMs, or what model? Even within AI, there is commoditization, cost reductions for the models, for innovations, and chips and other key inputs.

Chris Mackay: Will core AI be competed away by a decent, cheaper, ubiquitous, open source AI services and LLMs or what model? Even within AI, there is commoditization cost reductions for the models, for innovations, and chips and other key inputs. In all cases, prices matter. Obviously, purchase prices, but also for holding and for selling. Hence, MFF's focus on quality business performance is supplemented by our value market price awareness. Over years, we receive very valuable opportunities from market price fluctuations. We are analytical, liquid, conservatively financed, and able to move. We don't seek to time markets but view prices against risks, probabilities, future profitable growth potential, and alternative opportunities, including a view on potential future opportunities. Cash.

Speaker #2: In all cases, prices matter—obviously purchase prices, but also for holding and for selling. Hence, MFF's focus on quality business performance is supplemented by a value market price awareness.

Chris Mackay: Hence, MFF's focus on quality business performance is supplemented by our value market price awareness. Over years, we receive very valuable opportunities from market price fluctuations. We are analytical, liquid, conservatively financed, and able to move. We don't seek to time markets but view prices against risks, probabilities, future profitable growth potential, and alternative opportunities, including a view on potential future opportunities. Cash. You see the cash at circa 5%. It gives us optionality, but it is a wasting asset, particularly with socialist and populist governments. Turning quickly to broader markets. Political and geopolitical disasters damage market prices, as does inflation and cost of living pressures. Market price movements are exaggerated compared with underlying valuation changes. Our concerns are everywhere. We have stubborn inflation fueled by too-low official interest rates and out-of-control governments having to deal with deteriorating, riskier base cases. Political and geopolitical risks are amplified.

Speaker #2: Over the years, we received very valuable opportunities for market price fluctuations. We're analytical, liquid, conservatively financed, and able to move. We don't seek to time markets, but view prices against risks, probabilities, future profitable growth potential, and alternative opportunities, including a view on potential future opportunities.

Speaker #2: Cash—you see the cash at circa 5%. It gives us optionality, but it is a wasting asset, particularly with socialist and populist governments.

Chris Mackay: You see the cash at circa 5%. It gives us optionality, but it is a wasting asset, particularly with socialist and populist governments. Turning quickly to broader markets. Political and geopolitical disasters damage market prices, as does inflation and cost of living pressures. Market price movements are exaggerated compared with underlying valuation changes. Our concerns are everywhere. We have stubborn inflation fueled by too-low official interest rates and out-of-control governments having to deal with deteriorating, riskier base cases. Political and geopolitical risks are amplified.

Speaker #2: Turning quickly to broader markets: political and geopolitical disasters damage market prices, as do inflation and cost-of-living pressures. Market price movements are exaggerated compared with underlying valuation changes.

Speaker #2: Our concerns are everywhere. We have stubborn inflation, fueled by too-low official interest rates, and out-of-control governments having to deal with deteriorating, riskier base cases.

Speaker #2: Political risks are amplified. Momentum and algorithmic markets impact trading and affect markets. There's excessive leverage and risk-taking. Emerging market risks are not being sufficiently focused upon.

Chris Mackay: Momentum and algorithmic trading impact markets. There is excessive leverage and risk-taking. Emerging market risks are under-focused upon. Possible foreign holders rotating out of US assets is another risk. Very importantly, the multipliers of large CapEx cycles and high market prices, plus some usual and idiosyncratic accounting and tax benefits associated with a CapEx boom mean that the current earnings are higher than they would be through a cycle. For Australian market watchers, it is worth reading "The Twilight of Exceptionalism," Paul Kelly's recent book. It is damning. For global markets, perhaps you should reread Roger Lowenstein, "When Genius Failed," which is about Long-Term Capital Management. Key factors are earnings and longer-term yields, as we talked about. Noise and pundits are everywhere, dragging people into investments that they shouldn't make. Their interests are not aligned with people seeking to grow capital and protect for wealth.

Speaker #2: Possible foreign holders rotating out of US assets is another risk. Very importantly, the multipliers of large capex cycles and high market prices, plus the usual—some usual and idiosyncratic accounting and tax benefits associated with the capex firm—mean that current earnings are higher than they would be through the cycle.

Speaker #2: For the Australian market, it's worth reading The Twilight of Exceptionalism, Paul Kelly's recent book. It's damning for global markets. Perhaps you should reread Roger Lowenstein's When Genius Failed, which is about LTCM.

Speaker #2: Key factors are earnings and longer-term yield, as we talked about. Noise and pundits are everywhere, dragging people into investments that they shouldn't make.

Speaker #2: Their interests are not aligned with people seeking to grow capital and protect or build wealth. We focus on microeconomics and scalers, and obvious beneficiaries of technological changes, provided the businesses are well run.

Chris Mackay: Their interests are not aligned with people seeking to grow capital and protect for wealth. We focus on microeconomics, and scale is an obvious beneficiary of technological changes, provided the businesses are well-run. Many are moving to attempt to become AI natives, and I'd say Montaka, for example, is advanced in their processes. Macroeconomics and politics are some of the factors we all have to deal with. Using margins of safety in terms of prices and quality and resilience of business, for example. Looking backwards to look forward, it appears that earnings declines of 10% or more, sometimes amplified by interest rate rises, are keys to major market declines, i.e., unsurprisingly, earnings are the key.

Chris Mackay: We focus on microeconomics, and scale is an obvious beneficiary of technological changes, provided the businesses are well-run. Many are moving to attempt to become AI natives, and I'd say Montaka, for example, is advanced in their processes. Macroeconomics and politics are some of the factors we all have to deal with. Using margins of safety in terms of prices and quality and resilience of business, for example. Looking backwards to look forward, it appears that earnings declines of 10% or more, sometimes amplified by interest rate rises, are keys to major market declines, i.e., unsurprisingly, earnings are the key. The current cycle has an important CapEx and accounting and multiplier effects, which will continue to impact upon future earnings. In closing, I mentioned Gerald a couple of times here. Clearly, he's got a mandate to build businesses.

Speaker #2: Many are moving to attempt to become AI natives. And I'd say Monica, for example, is advanced in their processes. Macroeconomics and politics are some of the factors we all have to deal with.

Speaker #2: Using margins of safety in terms of prices, quality, and resilience of the business, for example, looking backward to look forward, it appears that earnings declines are 10% or more, sometimes amplified by interest rate rises.

Speaker #2: Keys to major market declines. Unsurprisingly, earnings are the key. The current cycle has important capex, accounting, and multiplier effects, which will continue to impact future earnings.

Chris Mackay: The current cycle has an important CapEx and accounting and multiplier effects, which will continue to impact upon future earnings. In closing, I mentioned Gerald a couple of times here. Clearly, he's got a mandate to build businesses. We want the 10-year slide, hopefully in 10 years to come, to show business earnings of AUD 100 million-plus. As longer-term shareholders will be aware, I've failed to acquire or develop a business over the previous 10 years to go to anything like that level. So I'll hand back to you, Gerald.

Speaker #2: In closing, I mentioned Gerald a couple of times here. Clearly, he's got a mandate to build businesses. We want the 10-year slide, hopefully in the 10 years to come, to show business earnings of $100 million plus.

Chris Mackay: We want the 10-year slide, hopefully in 10 years to come, to show business earnings of AUD 100 million-plus. As longer-term shareholders will be aware, I've failed to acquire or develop a business over the previous 10 years to go to anything like that level. So I'll hand back to you, Gerald.

Speaker #2: As longer-term shareholders will be aware, I've failed to acquire or develop a business over the previous 10 years to go to anything like that level.

Speaker #2: I'll hand back to you, Gerald.

Speaker #1: Thanks, Chris.

Gerald Stack: Thanks, Chris. All right. We'll move to page 8. Page 8 addresses the evolution of MFF and frames our evolution as three distinct phases. In phase 1, from the IPO in late 2006 through to 2013, MFF was managed by an external investment manager, Magellan Asset Management, with research support and back-office capabilities outsourced to Magellan. The average management expense ratio, or MER, as we often talk about, through that period was 1.3%. In the second phase of MFF's evolution, MFF was renamed MFF Capital Investments Limited, and Chris joined MFF Capital as the Portfolio Manager. From 2014 through to 2025, MFF continued to outsource research support and back-office capabilities. In the initial years of phase 2, from 2014 to 2016, the MER averaged 1.46%, while from 2017 to 2025, the MER averaged 0.45%.

Speaker #2: All right. We'll move to page A. Page A addresses the evolution of MFF and frames our evolution as three distinct phases. In phase one, from the IPO in late 2006 through to 2013, MFF was managed by an external investment manager, Magellan Asset Management, with research support and back-office capabilities outsourced to Magellan.

Speaker #2: The average Management Expense Ratio (MER), as we often talk about, during that period was 1.3%. In the second phase of MFF's evolution, MFF was renamed MFF Capital Investments Limited, and Chris joined MFF Capital as the portfolio manager.

Speaker #2: From 2014 through to 2025, MFF continued to outsource research support and back-office capabilities. In the initial years of phase two, from 2014 to 2016, the MER averaged 1.46%.

Speaker #2: While from 2017 to 2025, the MER averaged 0.45%. In the most recent phase of our evolution, Chris continues as the portfolio manager for MFF, but research support and back-office capabilities have now been internalized.

Gerald Stack: In the most recent phase of our evolution, Chris continues as the portfolio manager for MFF, but research support and back-office capabilities have now been internalized. We calculate the MER for financial year 2026 as 0.75%. As we note at the bottom of the page, we believe that MFF's newly internalized structure delivers a more resilient platform with potential to capture new opportunities and realize scale benefits over time. Finally, we move to page nine to discuss the outlook. Firstly, MFF is well-positioned to withstand market volatility and make opportunistic portfolio changes and additions over time. The portfolio remains concentrated in advantaged businesses with resilience demonstrated through 2026. Our investment mandate is unconstrained. Our capital structure enables patience and selectivity, and we have more than AUD 120 million available in liquidity along with significant prudent debt capacity. Secondly, MFF has the people capabilities and culture in place to drive long-term growth.

Speaker #2: We calculate the MER for financial year 2026 as 0.75%. As we note at the bottom of the page, we believe that MFF's newly internalized structure delivers a more resilient platform, with potential to capture new opportunities and realize scale benefits over time.

Speaker #2: Finally, we move to page nine to discuss the outlook. Firstly, MFF is well-positioned to withstand market volatility and make opportunistic portfolio changes and additions over time.

Speaker #2: The portfolio remains concentrated in advantaged businesses, with resilience demonstrated through 2026. Our investment mandate is unconstrained, our capital structure enables patience and selectivity, and we have more than $120 million available in liquidity, along with significant prudent debt capacity.

Speaker #2: Secondly, MFF has the people, capabilities, and culture in place to drive long-term growth. Our team of 19 full-time employees are across corporate operations and investments.

Gerald Stack: Secondly, MFF has the people capabilities and culture in place to drive long-term growth. Our team of 19 full-time employees are across corporate operations and investments. Our global equities research capabilities have been extended by Montaka Global Investments, and we have introduced a long-term incentive plan to maximize the alignment of the team to long-term shareholder outcomes. We will now move to questions from shareholders. Julia Bain, our Head of Strategy and Business Development, will facilitate this section. We will endeavor to address as many of your questions as time permits. Julia.

Gerald Stack: Our team of 19 full-time employees are across corporate operations and investments. Our global equities research capabilities have been extended by Montaka Global Investments, and we have introduced a long-term incentive plan to maximize the alignment of the team to long-term shareholder outcomes. We will now move to questions from shareholders. Julia Bain, our Head of Strategy and Business Development, will facilitate this section. We will endeavor to address as many of your questions as time permits. Julia.

Speaker #2: Our global equities research capabilities have been extended via Monica Global Investments, and we've introduced a long-term incentive plan to maximize the alignment of the team to long-term shareholder outcomes.

Speaker #2: Right. We will now move to questions from shareholders. Julia Bane, our Head of Strategy and Business Development, will facilitate this section. We'll endeavor to address as many of your questions as time permits.

Speaker #2: Julia.

Speaker #3: Thanks, Gerald. As a reminder, you can submit a question by using the live Q&A tab located on the right-hand side of your screen.

Julia Bain: Thanks, Gerald. As a reminder, you can submit a question by using the live Q&A tab located on the right-hand side of your screen. Where multiple questions are submitted on the same topic, we may consolidate these so we can address them as efficiently as possible. I will start with a couple of questions on markets and the portfolio for Chris. Chris, what has surprised you most about markets over the last year?

Julia Baine: Thanks, Gerald. As a reminder, you can submit a question by using the live Q&A tab located on the right-hand side of your screen. Where multiple questions are submitted on the same topic, we may consolidate these so we can address them as efficiently as possible. I will start with a couple of questions on markets and the portfolio for Chris. Chris, what has surprised you most about markets over the last year?

Speaker #3: When multiple questions are submitted on the same topic, we consolidate these so we can address them as efficiently as possible. I'll start with a couple of questions on markets and the portfolio for Chris.

Speaker #3: Chris, what has surprised you most about markets over the last year?

Speaker #4: Thanks, Julia. At the start of calendar '26, our view was relatively benign to positive in terms of the economic outlook. What has surprised me, however, has been the absolute magnitude of the extreme profitability growth that has been achieved in the year to date and looks like it's continuing.

Chris Mackay: Thanks, Julia. At the start of calendar 2026, our view was relatively benign to positive in terms of the economic outlook. What has surprised me, however, has been the absolute magnitude of the extreme profitability growth that has been achieved in the year to date and looks like it is continuing. Most particularly in AI and AI related areas. Alphabet, our largest holding, an 82% increase in revenues for Google Cloud, and very significant double-digit increases in terms of its core search business. YouTube going through the roof as well. You could run through each of the holdings that we have got in the top part of the portfolio, and you see repeatedly that the earnings have been very significant. That has surprised me. I talked during the prepared remarks about some accounting factors. For example, the expenditure on new capital, I believe it is growth expenditure.

Speaker #4: Most particularly in AI and AI-related areas. Alphabet, our largest holding, saw an 82% increase in revenues for Google Cloud and very significant double-digit increases in terms of its core Search business, with YouTube going through the roof as well.

Speaker #4: You could run through each of the holdings that we've got in the top part of the portfolio, and you'd see repeatedly that the earnings have been very significant.

Speaker #4: That has surprised me. I talked during the prepared remarks about some accounting factors. So, for example, the expenditure on new capital—I believe it's growth expenditure—however, it's recorded by a number of the providers of the equipment directly as income, in some cases at 80% margins, but it's depreciated over, let's say, six years by the companies expending it.

Chris Mackay: For example, the expenditure on new capital, I believe it is growth expenditure. However, it is recorded by a number of the providers of the equipment directly as income, in some cases at 80% margins, but it is depreciated over, let us say, six years by the companies expending it. So there is a mismatch, as there always is in capital cycles, between the expenditure of cash and the accounting treatment. We are mindful of that. Having said all that is the number one that I regard as a surprise. Second surprise, but less extreme, is that there has not been an extreme blowout in longer-term rates. It has been well known, the issues with government budget deficits. There are the wars and those sorts of factors.

Chris Mackay: However, it is recorded by a number of the providers of the equipment directly as income, in some cases at 80% margins, but it is depreciated over, let us say, six years by the companies expending it. So there is a mismatch, as there always is in capital cycles, between the expenditure of cash and the accounting treatment. We are mindful of that. Having said all that is the number one that I regard as a surprise. Second surprise, but less extreme, is that there has not been an extreme blowout in longer-term rates. It has been well known, the issues with government budget deficits. There are the wars and those sorts of factors. That has not occurred yet. There has been an increase, 4.7% or so on the US 10-year bond, is not extreme, certainly by historical standards. Reserve banks around the world have not curtailed the longer-term rates, so that is a surprise.

Speaker #4: So, there's a mismatch, as there always is in capital cycles, between the expenditure of cash and the accounting treatment. We're mindful of that. Having said all that, that's the number one thing that I regard as a surprise.

Speaker #4: Second, perhaps surprisingly but less extreme, is that there’s not been an extreme blowout in longer-term rates. It’s been well known, the issues with government budget deficits.

Speaker #4: There's the wars and those sorts of factors. That hasn't occurred yet. There's been an increase—up to seven or so—on the US 10-year bond, which is not extreme.

Chris Mackay: That has not occurred yet. There has been an increase, 4.7% or so on the US 10-year bond, is not extreme, certainly by historical standards. Reserve banks around the world have not curtailed the longer-term rates, so that is a surprise. The third surprise is how much less expensive it is to borrow, even in Greece, than it is in Australia, the US, and the UK. France, Italy, Germany, that is a surprise to anyone. Japan, obviously. That is a surprise to anyone looking back over decades. There are three.

Speaker #4: Certainly, by historical standards, reserve banks around the world have not curtailed the longer-term rates, so that's a surprise. The third surprise is how much less expensive it is to borrow, even in Greece, than it is in Australia, the US, and the UK.

Chris Mackay: The third surprise is how much less expensive it is to borrow, even in Greece, than it is in Australia, the US, and the UK. France, Italy, Germany, that is a surprise to anyone. Japan, obviously. That is a surprise to anyone looking back over decades. There are three.

Speaker #4: France, Italy, Germany—that's not a surprise to anyone—and Japan, obviously. That's not a surprise to anyone looking back over decades. There's three.

Speaker #3: Thanks, Chris. Now turning to one of our portfolio companies, Meta. Would you be able to share your thoughts on whether there is an increasing risk that Meta is not getting sufficient return on capex?

Julia Bain: Thanks, Chris. Now turning to one of our portfolio companies, Meta, would you be able to share your thoughts on whether there is an increasing risk that Meta is not getting sufficient return on CapEx?

Julia Baine: Thanks, Chris. Now turning to one of our portfolio companies, Meta, would you be able to share your thoughts on whether there is an increasing risk that Meta is not getting sufficient return on CapEx?

Speaker #4: There clearly is a risk. So, Meta has been extremely successful at automating its core business of advertising. It has three and a half billion users.

Chris Mackay: There clearly is a risk. Meta has been extremely successful at automating its core business of advertising. It has 3.5 billion users. It has underutilized avenues to market. The jury is out as to whether it will be able to provide an open source. They have said that they want to move to open source AI service available to the users across their various platforms. In that case, they are likely to be able to monetize over time the increased usage and the ongoing ubiquity of their services. They have pivoted three or four times in their history. Not all of their major initiatives have been successful. They are called Meta, even though the metaverse is now a far less important part of their process. So in that case, jury is still out in our view.

Speaker #4: It has underutilized avenues to market. The jury is out as to whether it will be able to provide an open source. They've said that they want to move to open source.

Speaker #4: AI service available to the users across their various platforms. In that case, they're likely to be able to monetize over time, given the increased usage and the ongoing ubiquity of their services.

Speaker #4: They've pivoted three or four times in their history. Not all of their major initiatives have been successful. They're called Meta even though Meta is now far less important—the metaverse is a far less important part of their process.

Speaker #4: So, in that case, the jury is still out in our view, and we'll have to see how they develop the returns over time.

Chris Mackay: We will have to see how they develop the returns over time.

Speaker #3: Thanks, Chris. Our next question is: Would MFF consider investment in the semiconductor industry an area where the portfolio has typically avoided investment to date?

Julia Bain: Thanks, Chris. Our next question is, would MFF consider investment in the semiconductor industry, an area where the portfolio has typically avoided investment to date?

Julia Baine: Thanks, Chris. Our next question is, would MFF consider investment in the semiconductor industry, an area where the portfolio has typically avoided investment to date?

Speaker #4: Yeah. If we go back some time, I was fortunate enough to meet the leadership of Qualcomm. Qualcomm—I was blown away at their genius. They were of extreme quality.

Chris Mackay: Yeah. If we go back some time, I was fortunate enough to meet the leadership of Qualcomm. Qualcomm, I was blown away at their genius. They were of extreme quality. We bought a relatively small position and sought to understand how Qualcomm was. It was one of the winners, of course, in the dot-com and technology booms of 2000. It was worth many hundreds of billions of AUD. It was a key provider of equipment and facilitated the move to mobile phones and currently involved in the move to AIs. Over a very long period of time, it became clear to me that I did not understand enough about the areas, that they were cyclical, they were highly competitive. It is better going to areas where there is less competition. We have said repeatedly, we prefer 3 billion customers to having 20 main customers, which they do.

Speaker #4: We bought a relatively small position and sought to understand how Qualcomm was—it was one of the winners, of course, in the dot-com and technology booms of 2000—and was worth many hundreds of billions of dollars.

Speaker #4: It was a key provider of equipment and facilitated the move to mobile phones, and is currently involved in the move to AIs. Over a very long period of time, it became clear to me that I didn't understand enough about the areas.

Speaker #4: That they were cyclical. They were highly competitive. It's better going to areas where there is less competition. We've said repeatedly we prefer 3 billion customers to having 20 main customers, which they do.

Chris Mackay: We have said repeatedly, we prefer 3 billion customers to having 20 main customers, which they do. We have avoided it for that reason, but clearly, the performance of those companies has been extraordinary. It is not our inclination to chase these things. There will be enough opportunities in areas where we think that we have advantages, and where the customer bases will continue in the hundreds of millions to billions over an extended period of time.

Speaker #4: We've avoided it for that reason, but clearly the performance of those companies has been extraordinary. It's not our inclination to chase these things. There will be enough opportunities in areas where we think that we have advantages and where the customer bases will continue in the hundreds of millions to billions over an extended period of time.

Chris Mackay: We have avoided it for that reason, but clearly, the performance of those companies has been extraordinary. It is not our inclination to chase these things. There will be enough opportunities in areas where we think that we have advantages, and where the customer bases will continue in the hundreds of millions to billions over an extended period of time.

Speaker #4: I'm sorry. One thing I should add: the best Australian investor in the sector over an extended period of time was Platinum. Platinum, if you read their materials going back over a long period of time, they talk about the cyclicality of the sector.

Julia Bain: Thanks.

Julia Baine: Thanks.

Chris Mackay: One thing I should add, the best Australian investor in the sector over an extended period of time was Platinum. Platinum, if you read their materials going back over a long period of time, they talk about the cyclicality of the sector. They played the cyclicality extraordinarily well over decades. They got to know it and understand it and spent time, obviously in Korea and elsewhere, analyzing it. We have not done that and do not start with the same mindset. I think that will continue with their current ownership with L1, just by the way.

Speaker #4: They played the cyclicality extraordinarily well over decades. They got to know it and understand it, and spent time, obviously, in Korea and elsewhere analyzing it.

Speaker #4: We've not done that, and don't start with it with the same mindset. I think that will continue with their current ownership with L1, just by the way.

Speaker #3: Thanks, Chris. Gerald, I'll hand over to you to answer our next question, which is on expenses. So, the question reads: Thank you for your transparency in relation to the MER.

Julia Bain: Thanks, Chris. Gerald, I will hand over to you to answer our next question, which is on expenses. The question reads, "Thank you for your transparency in relation to the MER, and I commend you for being so disciplined around expenses. I note a circa AUD 8.7 million increase in employee expenses. Outside of your salary as CEO, can you provide more context on this figure? For example, does it include the Montaka salaries? Who else has made up in staff expense?

Julia Baine: Thanks, Chris. Gerald, I will hand over to you to answer our next question, which is on expenses. The question reads, "Thank you for your transparency in relation to the MER, and I commend you for being so disciplined around expenses. I note a circa AUD 8.7 million increase in employee expenses. Outside of your salary as CEO, can you provide more context on this figure? For example, does it include the Montaka salaries? Who else has made up in staff expense?

Speaker #3: And I commend you for being so disciplined around expenses. I note a circa $8.7 million increase in employee expenses. Outside of your salary as CEO, can you provide more context on this figure?

Speaker #3: For example, does it include the Monte salaries? Who else is included in this staff expense?

Speaker #5: Thanks, Jonah. Those numbers are for all our staff. So, we have 19 members of staff: 8 at Montaker, including 2 support staff; 9 in the broader business; plus Chris and myself.

Gerald Stack: Thanks, Julia. Those numbers are for all our staff. We have 19 members of staff, eight at Montaka, including two support staff, nine in the broader business, plus Chris and myself. The increase in employee expenses reflects the fact that we have increased staff over the course of the year. That is an investment that we are making in capability that we think is important, both in terms of risk management and the opportunity to participate in growth over time. Yes, substantial increase in employee expenses, but it reflects the totality of what MFF brings to the table.

Speaker #5: So, the increase in employee expenses reflects the fact that we've increased staff over the course of the year. That's an investment that we're making in capability, which we think is important both in terms of risk management and the opportunity to participate in growth over time.

Speaker #5: So yes, substantial increase in employee expenses, but it reflects the totality of what MFF brings to the table.

Speaker #3: Thanks, Gerald. Maybe we'll stay with you for this next question. Would MFF ever consider investments in private markets?

Julia Bain: Thanks, Gerald. Maybe we will stay with you for this next question. Would MFF ever consider investments in private markets?

Julia Baine: Thanks, Gerald. Maybe we will stay with you for this next question. Would MFF ever consider investments in private markets?

Speaker #5: Thank you. Yes, we're open to investment in a range of different asset classes, on a couple of provisos. I think the first thing is that the asset or the opportunity would need to be seen as attractive.

Gerald Stack: Thank you. Yes, we are open to investment in a range of different asset classes, on a couple of provisos. I think the first thing is that the assets, the opportunity we would need to see as attractive and that it meets our broader objectives of compounding shareholder value over the longer term. That is our North Star. That is what we are looking for, whether it is listed or unlisted, liquid or illiquid. In saying all that, I would note that we value liquidity highly. It is really important to us. We would need to take that into account if we are looking at private markets. But certainly, we are open to those opportunities.

Speaker #5: And that it meets our broader objectives of compounding shareholder value over the longer term. That's our North Star. So that's what we're looking for, whether it's listed or unlisted, liquid or illiquid.

Speaker #5: Now, in saying all that, I would note that we value liquidity highly. It's really important to us, and we would need to take that into account if we're looking at private markets.

Speaker #5: But certainly, we're open to those opportunities.

Speaker #4: I'd just add that, in our public markets investment, we're a business investor. That's our core. Whether you're investing in public or private, subject to the liquidity, as Gerald has raised, it's a business investment.

Chris Mackay: I would just add that in our public markets investment, we are a business investor. That is our core. Whether you are investing in public or private, subject to the liquidity as Gerald has raised, it is a business investment.

Speaker #3: Thanks, Gerald and Chris. Jumping back to the portfolio again—Chris, close to 25% of the portfolio is in global payment platforms. Clearly, you have a very positive view.

Julia Bain: Thanks, Gerald and Chris. Jumping back to the portfolio again. Chris, close to 25% of the portfolio is in global payment platforms. Clearly, you have a very positive view. Can you expand on this positive view and where you see the risk are in these companies?

Julia Baine: Thanks, Gerald and Chris. Jumping back to the portfolio again. Chris, close to 25% of the portfolio is in global payment platforms. Clearly, you have a very positive view. Can you expand on this positive view and where you see the risk are in these companies?

Speaker #3: Can you expand on this positive view, and where you see the risk star in these companies?

Speaker #4: Yeah. First of all, we've held—so if we go back to the GFC, coming out of it, American Express became our largest position. We've focused on and understood the payment aspects.

Chris Mackay: Yeah, first of all, we have held. If we go back to the GFC, coming out of it, American Express became our largest position. We have focused on and understood the payment aspects. Ironically, Visa was the last IPO, and it IPO'd in 2008, where we aggressively tried to get a holding. We got to know Visa and Mastercard. The market has consistently underestimated the growth prospects of Visa and Mastercard. Their networks, we will put them to one side and come back to Amex in a second. We continue to hold the view that the market is underestimating the growth prospects. They have now both moved their value-added services. They have slightly different names for them, value-added services businesses, to 35% to 40% of their revenues at very high margins. They have expanded. There is clear flywheel and adjacencies going on with their businesses. They have teamed up with every other different form of payment.

Speaker #4: Ironically, Visa was the last IPO, and it IPO'd in 2008, where we aggressively tried to get a holding. We got to know Visa and MasterCard.

Speaker #4: The market has consistently underestimated the growth prospects of Visa and MasterCard. Their networks will set them apart. We'll come back to Amex in a moment.

Speaker #4: In a second, we continue to hold the view that the market is underestimating the growth prospects. They've now both moved their value-added services—they have slightly different names for them.

Speaker #4: Value-added services business is now 35% to 40% of their revenues, at very high margins. They've expanded. There's a clear flywheel and adjacencies going on with their businesses.

Chris Mackay: They have expanded. There is clear flywheel and adjacencies going on with their businesses. They have teamed up with every other different form of payment. You go back in time, those of us who understood Afterpay, the settlement of the payments for the payments, so three or four payments to meet your Afterpay or pay later obligations, typically were settled on Visa and Mastercard cards. They went from a once-off payment to a full payment and then increased the fee basis. The risks remain as they've been for a long while. There are domestic payment networks. The first was obviously China. China digitized and kept Visa and Mastercard out, even though they promised to allow them in in about 2000. It's only very recently Mastercard's been involved.

Speaker #4: They've teamed up with every other different form of payment. You go back in time, those of us who understood Afterpay, the settlement of the payments on four payments.

Chris Mackay: You go back in time, those of us who understood Afterpay, the settlement of the payments for the payments, so three or four payments to meet your Afterpay or pay later obligations, typically were settled on Visa and Mastercard cards. They went from a once-off payment to a full payment and then increased the fee basis. The risks remain as they've been for a long while. There are domestic payment networks. The first was obviously China. China digitized and kept Visa and Mastercard out, even though they promised to allow them in in about 2000. It's only very recently Mastercard's been involved. That's extended. India and Brazil have their own networks, but in both countries, the payments on Visa and Mastercard rails are still increasing. What's happening is that the populations are digitizing. China has now just opened up to Mastercard and to American Express.

Speaker #4: So three or four payments to meet your Afterpay or pay later obligations typically were settled on Visa and MasterCard cards. So they went from a once-off payment to four payments, and that increased the fee basis.

Speaker #4: The risks remain as they've been for a long while. There are domestic payment networks; the first was obviously kept Visa and MasterCard out, even though they promised to allow them in around 2000.

Speaker #4: And so, it's only very recently MasterCard's been involved. That's extended. India and Brazil have their own networks, but in both countries, the payments on Visa and MasterCard rails are still increasing, and what's happening is that the populations are digitizing.

Chris Mackay: That's extended. India and Brazil have their own networks, but in both countries, the payments on Visa and Mastercard rails are still increasing. What's happening is that the populations are digitizing. China has now just opened up to Mastercard and to American Express. There are challenges. There are also challenges with litigation and regulation from time to time. We factor those things into our assessments. The core payment business of moving to tap and go has increased security and increased incidence of payments, so that's been a positive. Amex, I'll deal with quickly. It's become a prestige mark for the various generations that I would like to be part of. The 26-year-old through to 35-year-old wants to get the rewards, wants to get the associated benefits.

Speaker #4: China has now just opened up to MasterCard and to American Express. So there are challenges. There are also challenges with litigation and regulation from time to time.

Chris Mackay: There are challenges. There are also challenges with litigation and regulation from time to time. We factor those things into our assessments. The core payment business of moving to tap and go has increased security and increased incidence of payments, so that's been a positive. Amex, I'll deal with quickly. It's become a prestige mark for the various generations that I would like to be part of. The 26-year-old through to 35-year-old wants to get the rewards, wants to get the associated benefits. They've done a superb job at broadening. If you look at Delta, which is one of their partners, for example, it is the cornerstone of their success in the US market. They lend, whereas Visa, Mastercard do not lend. They have pristine lending results, which continue at this time.

Speaker #4: We factor those things into our assessments. The core payment business of moving to tap-and-go has increased security and increased incidence of payments.

Speaker #4: So it's been a positive. Amex will deal with it quickly. It's become a prestige mark for the various generations that I would like to be part of.

Speaker #4: So the 26-year-old through to 35-year-old wants to get the rewards, wants to get the associated benefits. They've done a superb job at broadening, and if you look at Delta—which is one of their partners, for example—it is a cornerstone of their success in the U.S. market.

Chris Mackay: They've done a superb job at broadening. If you look at Delta, which is one of their partners, for example, it is the cornerstone of their success in the US market. They lend, whereas Visa, Mastercard do not lend. They have pristine lending results, which continue at this time. We added to the Amex position mostly in 2022, and again, it's been one of the AUD 100 million plus gains that we've had. Looking forward, we'd expect more normal growth from them, without the acceleration that they got in getting the various alphabet generations, but still satisfactory.

Speaker #4: They also have pristine, they lend, whereas Visa and MasterCard do not lend. They have pristine lending results, which continue at this time. So, we added to the Amex position mostly in 2022, and again, it's been one of the $100 million-plus gains that we've had.

Chris Mackay: We added to the Amex position mostly in 2022, and again, it's been one of the AUD 100 million plus gains that we've had. Looking forward, we'd expect more normal growth from them, without the acceleration that they got in getting the various alphabet generations, but still satisfactory.

Speaker #4: Looking forward, we'd expect more normal growth from them—without the acceleration they got in getting the various alphabet generations, but still satisfactory.

Speaker #3: Thanks, Chris. Next question is for Gerald. Gerald, your FDI scorecard contains a metric to develop a long-term sustainable business, and this was marked as "at threshold" rather than "at target" in your performance assessment.

Julia Bain: Thanks, Chris. Next question is for Gerald. Gerald, your STI scorecard contains a metric to develop a long-term sustainable business, and this was marked as at threshold rather than at target in your performance assessment. What was lacking, and should this be of concern to us as shareholders?

Julia Baine: Thanks, Chris. Next question is for Gerald. Gerald, your STI scorecard contains a metric to develop a long-term sustainable business, and this was marked as at threshold rather than at target in your performance assessment. What was lacking, and should this be of concern to us as shareholders?

Speaker #3: What was lacking, and should this be of concern to us as shareholders?

Speaker #5: Thanks, Julia. As is often the case, I’m the problem in the scorecard indicates the broader board’s clear desire to develop a long-term sustainable business. Chris has touched on that already this morning.

Gerald Stack: Thanks, Julia. As is often the case, I am the problem in this. That point on the STI scorecard indicates the board's clear desire to develop a long-term sustainable business. Chris has touched on that already this morning. I would add that we, as Chris has also suggested, we look at all our investments as businesses first and foremost. That is our objective. The reality is, in the six months that I have been CEO, we have not done something in that space at this point in time, and therefore, it is logical, rational that it would be marked below target at this point in time. It remains a focus for us. It remains something that we continue to look at.

Speaker #5: And I would add that we, as Chris has also suggested, look at all our investments as businesses first and foremost. So that's our objective.

Speaker #5: The reality is, in the six months that I've been CEO, we have not done something in that space at this point in time, and therefore it's logical, rational, that it would be marked below target at this point in time.

Speaker #5: It remains a focus for us. It remains something that we continue to look at. But any potential acquisition of a business would need to meet our criteria in terms of the issues.

Gerald Stack: Any potential acquisition of a business would need to meet our criteria in terms of the issues I raised earlier on, that we see the business as attractive and that we have a belief that this will compound value for shareholders over the long term.

Speaker #5: I mentioned earlier that we see the business as attractive and that we believe this will compound value for shareholders over the long term.

Speaker #3: Thanks, Gerald. Another question on the portfolio. While the position is small, Chris, could you please outline the thought process for the investments in WAM Global and WAM Strategic Value, considering WAM Global is trading at around or past NTA?

Julia Bain: Thanks, Gerald. Another question on the portfolio. While the positions are small, Chris, could you please outline the thought process for the investments in WAM Global and WAM Strategic Value, considering WAM Global is trading at around par for NTA?

Julia Baine: Thanks, Gerald. Another question on the portfolio. While the positions are small, Chris, could you please outline the thought process for the investments in WAM Global and WAM Strategic Value, considering WAM Global is trading at around par for NTA?

Speaker #4: So WAM Strategic has sort of reported their results. They've done a presentation recently, though trading at a discount. We've known Jeff Wilson. So I mentioned in the prepared notes that we were doing 100 or so underwritings a year.

Chris Mackay: WAM Strategic has reported their results. They have done a presentation recently. They were trading at a discount. We have known Geoff Wilson since I mentioned in the prepared notes that we were doing 100 or so underwritings a year back in my old life, and one of the parties that always stood out was Proveage, where Geoff was the lead person to participate in the underwriting. So we have known Geoff over an extended period of time. WAM Strategic, let us see where it goes. Clearly, if there was something significant that come along, and it is more likely to come along in a down market rather than an up market, we could be a participant. We have got capital, we have got understanding, and we could assist alongside WAM Strategic. We mentioned that to Geoff. WAM Global is actually really interesting. They have got very good portfolio managers.

Speaker #4: Back in my old life, one of the parties that always stood out was Pruvage, where Jeff was the lead person to participate in the underwriting.

Speaker #4: So we've known Jeff over an extended period of time. WAM Strategic—let's see where it goes. Clearly, if something significant were to come along, it's more likely to come along in a down market rather than an up market.

Speaker #4: We could be a participant. We've got capital, we've got understanding, and we could assist alongside WAM Strategic. We mentioned that to Geoff. WAM Global is actually really...

Chris Mackay: We mentioned that to Geoff. WAM Global is actually really interesting. They have got very good portfolio managers. Katrina, the lead, has now gone to be Chief Executive. She's retained a role with Global. The markets, as I said right at the outset, have actually been very difficult for typical quality-related investors, even with global mandates. They're executing quite well. Their portfolio is quite good. There are things that maybe over time we could do to work with them. We'll see. I think they've got tax losses on the balance sheet that are available. They're very good people. It's a tiny position, but we'll see where Geoff and Katrina and the teams want to take their businesses.

Speaker #4: We've got very good portfolio managers. The leaders have gone to the chief executive, and she's retained a role with Global. The markets, as I said right at the outset, have actually been very difficult for typical quality-related investors.

Chris Mackay: Katrina, the lead, has now gone to be Chief Executive. She's retained a role with Global. The markets, as I said right at the outset, have actually been very difficult for typical quality-related investors, even with global mandates. They're executing quite well. Their portfolio is quite good. There are things that maybe over time we could do to work with them. We'll see. I think they've got tax losses on the balance sheet that are available. They're very good people. It's a tiny position, but we'll see where Geoff and Katrina and the teams want to take their businesses.

Speaker #4: Even with global mandates, and they're executing quite well. Their portfolio is quite good. There are things that maybe, over time, we could do to work with them.

Speaker #4: We'll see. I think we've got tax losses on the balance sheet that are available. They're very, very good people. It's a tiny position, but we'll see where Jeff and Katrina and the teams want to take their businesses.

Speaker #3: Thanks, Chris. Our next question is: MFF now has two employees with infrastructure expertise in-house, Gerald and David Costello. Should we expect to see more investments in infrastructure in the portfolio over time?

Julia Bain: Thanks, Chris. Our next question is, MFF now has two employees with infrastructure expertise in-house, Gerald and David Costello. Should we expect to see more investments in infrastructure in the portfolio over time?

Julia Baine: Thanks, Chris. Our next question is, MFF now has two employees with infrastructure expertise in-house, Gerald and David Costello. Should we expect to see more investments in infrastructure in the portfolio over time?

Speaker #4: It's a question for me—if they stack up. So, we're not in Kansas anymore. When Gerald, with a beautiful glint in his eyes, was telling me about Sydney Airport being worth a multiple of value, and the 407.

Chris Mackay: That's a question for me. If they stack up. We're not in Kansas anymore. When Gerald, with a beautiful glint in his eyes, was telling me about Sydney Airport being worth a multiple of value and the 407, I have to reiterate, you've all got to go driving on the 407. July 2007, Hamish was unavailable, so I had to launch the Global Fund. One of the holdings was the indirect holding in the 407. People have recognized that these are high-quality assets that provide really good returns over an extended period of time. Therefore, my expectation, based on price and value, is that the disguised toll road type businesses with Visa, Mastercard, Meta in its own way, Alphabet, others, potentially have more opportunity because people don't do the work to do the assessment.

Speaker #4: Do I have to reiterate? You've all got to go driving the 407. In July 2007, Haymes was unavailable, so I had to launch the global fund.

Speaker #4: One of the holdings was the indirect holding in the 407. People have recognized that these are high-quality assets that provide really good returns over an extended period of time.

Speaker #4: Therefore, my expectation, based on price and value, is that the disguised toll-road-type businesses—with Visa, MasterCard, Meta in its own way, Alphabet, and others—potentially have more opportunity because people don't do the work to do the assessment.

Speaker #4: But certainly, from my perspective, if there are things that are attractive relative to the opportunity costs of the portfolio, by all means, we'd consider it.

Chris Mackay: Certainly from my perspective, if there are things that are attractive relative to the opportunity costs of the portfolio, by all means, we'd consider it.

Speaker #3: Thanks, Chris. Our next question is: why is Berkshire Hathaway not worth investing in at the moment?

Julia Bain: Thanks, Chris. Our next question is: Why is Berkshire Hathaway not worth investing in at the moment?

Julia Baine: Thanks, Chris. Our next question is: Why is Berkshire Hathaway not worth investing in at the moment?

Speaker #4: Berkshire Hathaway has been part of our portfolio. I've been a holder in Berkshire Hathaway for decades. Someone suggested to me that the objective, always, of holding Berkshire Hathaway was to see if it's possible to do as well or better on the side.

Chris Mackay: Berkshire Hathaway has been part of our portfolio. I have been a holder in Berkshire Hathaway for decades. Someone suggested to me that the objective always of holding Berkshire Hathaway was to see if it is possible to do as well or better on the side. That is probably the only benchmark that some people look at. Coming out of the GFC, where we increased our holding of cash, which turned out to be an issue because of the flooding of money from governments and elsewhere into stimulating the economy. We were very keen on ensuring that the types of investments that we took had limited downside risk and meaningful upside potential, even if it was not the multiple potential that is inherent in some of the holdings that we have had over an extended period of time. In that environment, we invested quite heavily into Berkshire Hathaway. It was successful for us.

Speaker #4: That's probably the only benchmark that some people look at. Coming out of the GFC, where we increased our holding of cash, which turned out to be an issue because of the flooding of money from governments and elsewhere into stimulating the economy.

Speaker #4: We were very keen on ensuring that the types of investments that we took had limited downside risk and meaningful upside potential, even if it was not the multiple potential that is inherent in some of the holdings that we've had over an extended period of time.

Chris Mackay: We were very keen on ensuring that the types of investments that we took had limited downside risk and meaningful upside potential, even if it was not the multiple potential that is inherent in some of the holdings that we have had over an extended period of time. In that environment, we invested quite heavily into Berkshire Hathaway. It was successful for us. We then, on a risk/reward basis, took it off the table and then invested elsewhere. I must say that the current results indicate that the cycle in insurance is turning. Similarly, people who are worried about CapEx should look more closely at what Warren says about CapEx. The measures that people are simplistically attaching to some of the hyperscalers saying there is no free cash flow.

Speaker #4: In that environment, we invested quite heavily into Berkshire Hathaway. It was successful for us. We then, on a risk-reward basis, took it off the table and invested elsewhere.

Chris Mackay: We then, on a risk/reward basis, took it off the table and then invested elsewhere. I must say that the current results indicate that the cycle in insurance is turning. Similarly, people who are worried about CapEx should look more closely at what Warren says about CapEx. The measures that people are simplistically attaching to some of the hyperscalers saying there is no free cash flow. Warren has repeatedly, year after year, said, "Well, we reinvest more than our total cash flow into the businesses of both energy and rail." Those are capital-intensive businesses. So maybe we will come back to Berkshire, but at, I think it is AUD 1.5 trillion market cap, the compounding is less than it was when it was much, much smaller.

Speaker #4: I might say that the current results indicate that the cycle in insurance is turning. Similarly, people are worried about capital expenditure. We should look more closely at what Berkshire says about capital expenditure.

Speaker #4: The measures that people are simplistically attaching to some of the year after year said, well, we reinvest more than our total cash flow into the businesses of both energy and rail.

Chris Mackay: Warren has repeatedly, year after year, said, "Well, we reinvest more than our total cash flow into the businesses of both energy and rail." Those are capital-intensive businesses. So maybe we will come back to Berkshire, but at, I think it is AUD 1.5 trillion market cap, the compounding is less than it was when it was much, much smaller.

Speaker #4: Those are capital-intensive businesses. So maybe we'll come back to Berkshire, but I think it's a $1.5 trillion market cap. The compounding is less than it was when it was much, much smaller.

Speaker #3: Thanks, Chris. Another question on the portfolio. Alphabet is a large weight. Can you conceptually explain how you value the company, given its clear and increasing complexity?

Julia Bain: Thanks, Chris. Another question on the portfolio. Alphabet is a large weight. Can you conceptually explain how you value the company given its clear and increasing complexity?

Julia Baine: Thanks, Chris. Another question on the portfolio. Alphabet is a large weight. Can you conceptually explain how you value the company given its clear and increasing complexity?

Speaker #4: Some of the parts are straightforward. So you look at the individual components of the business, starting obviously with the core search, YouTube, and Waymo is a separate business.

Chris Mackay: Some of the parts, straightforward. You look at the individual components of the business, starting obviously with the core search, YouTube. Waymo is a separate business. What we had underappreciated is that they have roughly AUD 1 trillion of other investments in these various other AI-type companies. So the same as you would do for any small company. The irony is that if you look at the reported accounts for Apple, Alphabet, even Meta, even Amazon to a large extent, they are actually really simple in terms of the way they are presented because they do not particularly hide anything, and they also tend not to have a whole lot of funnies and accounting nuances that need to be backed out. But long story short, it is some of the parts using conventional valuation measures. We also tend not to do spot valuations going forward. Spot valuations typically are wrong.

Speaker #4: What we’d underappreciated is that they have roughly $1 trillion of other investments in various other AI-type companies. So you just do the same as you would for any small company.

Speaker #4: The irony is that, if you look at the reported accounts for Apple, Alphabet, even Meta, even Amazon to a large extent, they're actually really simple.

Speaker #4: In terms of the way that they're presenting—presented—because they don't particularly hide anything, and they also tend not to have a whole lot of funnies and accounting nuances that need to be backed out.

Speaker #4: But, long story short, it's some of the parts using conventional valuation measures. We also tend not to do spot valuations going forward. Spot valuations typically are wrong.

Chris Mackay: We also tend not to do spot valuations going forward. Spot valuations typically are wrong. A former colleague, when I questioned them about every forecast of Magellan going upwards from bottom left to top right, said, "Well, of course, that is what is expected." That is just rubbish. It should instead be dealing with a range of outcomes so we would not be doing spot valuations. And over time, repeatedly, Alphabet has exceeded any reasonable expectations. Just as an example of an ancillary asset, look at what they are doing in medicine. Virtually every day, there is an announcement of a major company around the world that is teaming up with Amazon, Microsoft or Amazon, sorry, Alphabet, in terms of developing their own businesses.

Speaker #4: A former colleague, when I questioned them about every forecast of Magellan going upwards from bottom left to top right, said, "Well, of course, that's what's expected."

Chris Mackay: A former colleague, when I questioned them about every forecast of Magellan going upwards from bottom left to top right, said, "Well, of course, that is what is expected." That is just rubbish. It should instead be dealing with a range of outcomes so we would not be doing spot valuations. And over time, repeatedly, Alphabet has exceeded any reasonable expectations. Just as an example of an ancillary asset, look at what they are doing in medicine. Virtually every day, there is an announcement of a major company around the world that is teaming up with Amazon, Microsoft or Amazon, sorry, Alphabet, in terms of developing their own businesses.

Speaker #4: That's just rubbish. It should instead be a range dealing with a range of outcomes, so we wouldn't be doing spot valuations. And over time, repeatedly, Alphabet has exceeded any reasonable expectations.

Speaker #4: Just as an example of an ancillary asset, look at what they're doing in medicine. Virtually every day, there's an announcement of a major company around the world that is teaming up with Amazon, Microsoft, or, sorry, Alphabet, in terms of developing their own businesses.

Speaker #3: Thanks, Chris. Conscious of time, we might have three more questions before we wrap up. So, first one: where do you see the opportunities for the portfolio going forward?

Julia Bain: Thanks, Chris. Conscious of timing, we might have three more questions before we wrap up. First one, where do you see the opportunities for the portfolio going forward?

Julia Baine: Thanks, Chris. Conscious of timing, we might have three more questions before we wrap up. First one, where do you see the opportunities for the portfolio going forward?

Speaker #4: Yeah, I struggle at the moment for opportunities. I alluded to the fact that category three, of some sort of idiosyncratic opportunities, might be there.

Chris Mackay: Yeah, I struggle at the moment for opportunities. I alluded to the fact that the Category 3 of some idiosyncratic opportunities might be there. We talked in various of the monthlies about duration potentially shortening for various investors. We have not really done that, although we took quite a lot off the table, which was probably too early given the strength of markets and strength of earnings. At the moment, we have got areas of interest, but they are not particularly compelling. If I talk about an area which has been of interest regularly in the past, Nestlé was fundamental to moving the Magellan focus away from domestic companies to quality global companies. Its growth levels were higher than expected, but they were still sort of 2%, 3%. Similarly, for almost every other consumer company, they are doing it tough.

Speaker #4: We talked in various of the monthlies about duration potentially shortening for various investors. We haven't really done that, although we took quite a lot off the table, which was probably too early given the strength of markets and strength of earnings.

Speaker #4: So, at the moment, we've got areas of interest, but they're not particularly compelling. If I talk about an area which has been of interest regularly in the past, Nestlé was fundamental to moving the Magellan focus away from domestic companies to quality global companies.

Speaker #4: Its growth levels were higher than expected, but there was still sort of two or three percent. Similarly, for almost every other consumer company, they're doing it tough.

Chris Mackay: Similarly, for almost every other consumer company, they are doing it tough. If you walk around an Aldi in particular, you can see why they are doing it tough. Those sort of areas are not fertile at the moment. I am saying what is not, but we will see. Something will come, but it may take time.

Speaker #4: If you walk around on an Audi in particular, you can see why they're doing it tough. So those sorts of areas are not fertile at the moment.

Chris Mackay: If you walk around an Aldi in particular, you can see why they are doing it tough. Those sort of areas are not fertile at the moment. I am saying what is not, but we will see. Something will come, but it may take time.

Speaker #4: So I'm saying what's not, but we'll see. Something will come, but it may take time.

Speaker #3: Thanks, Chris. In your prepared remarks, you said that MFF's position would be strengthened by at least one cash-generative business in addition to the portfolio activity.

Julia Bain: Thanks, Chris. In your prepared remarks, you said that MFF's position would be strengthened by at least one cash generative business in addition to the portfolio activity. Could you provide some more color on this statement?

Julia Baine: Thanks, Chris. In your prepared remarks, you said that MFF's position would be strengthened by at least one cash generative business in addition to the portfolio activity. Could you provide some more color on this statement?

Speaker #3: Could you provide some more color on this statement?

Speaker #4: Yeah, that's been my view, and I've said it publicly for at least 10 years. Some of our shareholders have very kindly presented us with different businesses and, all over the place, different funds managers and insurance companies.

Chris Mackay: Yeah, that has been my view, and I have said it publicly for at least 10 years. Some of our shareholders very kindly presented us different businesses, and they are all over the place, different funds managers, insurance companies. One of the reasons, we also had the opportunity, we saw people investing in investment banks, and we however compared that to investing in Morgan Stanley and JP Morgan and made a lot of money and took it off the table. We own a position in Allianz. We have looked at other insurers. The CR I quoted earlier was Chubb. We have got to compare it to owning the best companies in the world that have scale and in many cases been around for decades that are there. The Australian business environment is difficult for a range of reasons.

Speaker #4: One of the reasons we also had the opportunity—we saw people investing in investment banks, and we, however, compared that to investing in Morgan Stanley and JP Morgan, and made a lot of money and took it off the table.

Speaker #4: We own a position in Allianz. We've looked at other insurers. The CEO quoted earlier was Chubb. So we've got to compare it to owning the best companies in the world that have scale and, in many cases, have been around for decades.

Speaker #4: That are there. The Australian business environment is difficult for a range of reasons. Anyone who runs a small or medium enterprise knows the rules and regulations that we've got to deal with.

Chris Mackay: Anyone who runs a small, medium enterprise knows the rules and regulations that we have got to do. The hurdle for us to find something is hard. Clearly, without any pressure on Gerald, if he just replicated what he did, a AUD 20 billion plus infrastructure business, the maths on that are pretty good in terms of cash generation.

Speaker #4: So the hurdle for us to find something is hard. Clearly, without any pressure on Gerald, if he just replicated what he did—a $20 billion-plus infrastructure business—the maths on that are pretty good in terms of cash generation.

Speaker #3: Thanks, Chris. And we'll keep our last question short and sweet. So, Chris, could you please repeat the names of the two books you mentioned in your address?

Julia Bain: Thanks, Chris. We will keep our last question short and sweet. Chris, could you please repeat the names of the two books you mentioned in your address?

Julia Baine: Thanks, Chris. We will keep our last question short and sweet. Chris, could you please repeat the names of the two books you mentioned in your address?

Speaker #4: Okay. So, Twilight of Exceptionalism is a Paul Kelly book. It's principally focused on the problems, for want of a better expression, with the Liberal National government through the last decade.

Chris Mackay: Okay. "Twilight of Exceptionalism" is a Paul Kelly book. It is principally focused on the problems, for want of a better expression, with the Liberal National Government through the last decade. In some ways, I think, even though it does not reference it builds on Donald Horne's "Death of the Lucky Country" or "The Lucky Country" going back in a far longer period. The Roger Lowenstein book is on Long-Term Capital.

Speaker #4: In some ways, I think even though it doesn't reference it, it builds on Donald Horne's Death of the Lucky Country, or Lucky Country, going back in it.

Speaker #4: A far longer period. And the Roger Lowenstein book is on Long-Term Capital, not LTCM—yeah, LTCM. And it was "When Genius Failed." Sorry, it took me a moment to get it.

Gerald Stack: LTCM.

Chris Mackay: Yeah, LTCM. It was "When Genius Failed." Sorry, it took me a moment to get it. You can go back to the '60s, the books dealing with the market conditions leading into the bubble that blew up in '73, '74 are really worth looking at. "The Gunslingers," Jerry Siegwarth and others. There are various books there. "The Go-Go Years" is one of the books. Leading into the financial crisis, there have been various books as well. The LTCM one is really interesting because the collapse for the 25-year-old, AUD 40 billion fund manager in a week, it was reminiscent of the bailout that was required for LTCM, and it shows that history rhymes.

Speaker #4: It's just the books. You can go back to the '60s, the books dealing with the market conditions leading into the bubble that blew up in '73, '74.

Speaker #4: They're really worth looking at—The Gunslingers by Jerry Sy and others. So there's various books there. The Go-Go Years is one of the books.

Speaker #4: Leading into the financial crisis, there have been various books as well. But the LTCM one is really interesting, because the collapse of the 25-year-old, $40 billion fund manager in a week was reminiscent of the bailout that was required for LTCM.

Speaker #4: And it shows that history rhymes.

Speaker #3: Unfortunately, we've now reached the time allocated for questions today. Thank you to all shareholders who submitted questions. We always appreciate your engagement. I'll now hand back to Gerald for closing remarks.

Julia Bain: Unfortunately, we have now reached the time allocated for questions today. Thank you to all shareholders who submitted questions. We always appreciate your engagement. I will now hand back to Gerald for closing remarks.

Julia Baine: Unfortunately, we have now reached the time allocated for questions today. Thank you to all shareholders who submitted questions. We always appreciate your engagement. I will now hand back to Gerald for closing remarks.

Speaker #1: Thanks, Julia. Thank you for joining us today and for your continued support of MFF Group. Should you have any further questions, I encourage you to reach out to our investor relations team.

Gerald Stack: Thanks, Julia. Thanks for joining us today and for your continued support of MFF Group. Should you have any further questions, I encourage you to reach out to our investor relations team. We look forward to seeing you at our annual general meeting on Tuesday, 20 October 2026. Thank you.

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