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00:00I want to kick off in Japan because this market for activists investing seems to
00:05be getting maybe even hotter and hotter. I mean I think there was 30 different
00:09campaigns that were launched in May alone but what are you seeing there and
00:12what are you most interested in right now? Yeah look thanks Annabelle for
00:16having me on the show. Japan is we would describe as a cornucopia of opportunity
00:21right now. It's been a dynamic that's been developing over time. Lots of
00:26companies where there's a good product, there's an undervaluation, there's maybe
00:30a bloated balance sheet, the opportunity for capital return. So we consider to see
00:35a strong flow of opportunities for us to invest in. And how many companies roughly
00:41you engage with right now in Japan? I would say at any one time anywhere between five
00:47and ten companies would be in the midst of some kind of dialogue. Some more engaged
00:52than others but that's the the usual sort of clip that we experience at Pallison.
00:56What's the one that's taking up most of your time at the moment? So at the moment
01:01we're highly engaged with a company called KSO Railway which has been a
01:06position of ours for some time. We put resolutions into the AGM last year and
01:11we've been making suggestions around governance again this year. And then there
01:15are other situations like one I'm going to discuss today at the conference and
01:19which I can't go into too much detail on just now.
01:23The support for those resolutions, where is it coming from? Where are you finding in
01:29terms of the other investors who's most supportive?
01:32Yeah, that's a very interesting question Annabelle. And I think it's a contrast with
01:38what we've seen over the past years in Japan and has changed more recently. What we've
01:43found is a great deal of the support and some of the most involved and most helpful dialogues
01:49that we've had with shareholders have been with the domestic asset management firms as opposed to
01:54necessarily the foreigners. Oftentimes the foreign shareholders are supportive but what's
02:00different this time for us in addition to Tokyo Stock Exchange and their positive initiatives for
02:07change is that level of dialogue and engagement with local shareholders.
02:11And what sparked that exactly? What prompted the shift? We know the Value Up program has been
02:16underway for several years now but is that it or is there something else that gets you that support locally?
02:22I think, you know, that to us it feels like there's just a feeling within the business and investment
02:28community that it's time for change, that Japan can do better. And we've also felt this dynamic,
02:35for example, when we're looking for director candidates for boards. Lots of senior business
02:40executives in Japan, now they're available to take on non-executive director roles. You really hear from
02:47them this desire for change and improvement and that feels to us as if it's crossed the board with the
02:52asset management firms, as I mentioned, but also among a number of individuals and business executives in Japan.
02:58Tokyo Tadamono is another holding. What's your plan for that business?
03:03So we made our views pretty clear on this company. Going back to last October, we presented on them
03:09in a conference similar to the SonamCon conference, that time in New York. And we put forward a number
03:15of suggestions and ideas surrounding governance, surrounding capital return and, you know, a fantastic
03:22portfolio of assets. And we're very pleased to see the company in the midterm plan they announced some
03:28months afterwards, taking on board a lot of those changes, which really help create this positive
03:35momentum in the sector and in the market for that kind of change. Can you draw the distinctions that
03:42you see or the similarities or differences that you see between the activist investing market in Japan
03:48versus Korea that has its own value up program, even though it's a bit newer, of course, or much newer,
03:53really? Yeah, a lot of history and experience on the side of Palliser in Korea. Many of the team were at
03:59Elliott before we got the business started at Palliser and had a lot of experiences there. I would describe it
04:06this way that Korea, it has the potential to create the same kind of change and development we've seen in Japan,
04:14but it's a little bit behind. By consequence of it being a little bit behind, a lot of valuations are
04:20even cheaper. Clearly, there's been a little bit of political change there recently, as there often
04:26is in Korea. We're going to get some resolution on that through the election next week. And we're confident,
04:32as we have a number of positions there as well, that similar improvements and change are going to come
04:37through over time. The presidential election is taking place early next week. Regardless of the outcome,
04:46do you see greater support for activism in Korea moving forward? I think so. And I think it's noteworthy that
04:55both major candidates have made comments, whether it's value up or boost up, as I believe one of the candidates
05:03is describing his ideas on corporate governance, change and improvement. There does seem to be that dynamic
05:09for change across the board. So we're hopeful that that will play through to better performance and better
05:14governance and critically better returns at some of these companies that are listed on the stock market there.
05:20It's interesting you talk about the local asset managers in Japan being supportive of the changes
05:25you're trying to enact at businesses. What's something that's also quite particular about the Korean market
05:30is the really heavy role or big role that also retail investors can play in activism. So do you
05:36work alongside retail investors at all? Or do you see a role for them to play in what you're also trying
05:41to execute? I think there's definitely a role for retail shelters to play in a market like Korea.
05:47In a historic engagement project with Samsung C&T, we saw strong real retail interest in improvement.
05:54On our side, we've taken part in webinars and blogs that are directed at retail investors
06:01to try and help disseminate the kind of views that we have. And we've been pleased with the level of support
06:07and resonance that that's gained in many of those situations.
06:11Last year at the Soam Conference in Hong Kong, you took the stage and you were outlining the case for Rio Tinto.
06:18You've had a lot of engagement with that business over the past 12 months, but where exactly does it stand today?
06:24Yeah, so it's certainly been quite an involved project that one and we've seen
06:28resolutions lodged by us in both the PLC and limited AGMs. Not too much detail I can go into at this point,
06:37but we were pleased our proposal for review of simplifying the organisational structure got the support of
06:43ISS at Glass-Lewis and some key commentators, including some of your colleagues actually at
06:49Bloomberg on the Newsdeck side. And look, I think, you know, companies going through some changes.
06:55I read about some C-suite change last week and we'll have to see how things play out in that particular
07:01situation. But a great company with great prospects and we're pleased to be a long-term shareholder of
07:06that business. Your primary proposal is to shift the primary listing back to Australia.
07:14Yeah, look, I mean, in effect, what we proposed was a review surrounding a unification exercise
07:23very similar to the one that occurred at BHP some years ago. I think relevantly in that case,
07:30we saw some initial reluctance on the company side. But ultimately, several years down the track,
07:37that was an initiative that the company adopted and moved forward with. So it's similar to that.
07:43And, you know, we look forward to continuing our constructive engagement with that group over time.
07:49Last question on Rio then. Do you see them following that path of BHP then? Do you see
07:54ultimately that the listing will change or the primary listing will change?
07:57I mean, look, obviously it's something that we think would make sense because we
08:02put it forward so vocally to the AGM for a review. But look, as to as to whether they go down that
08:09path or not, you know, we'll have to wait and see Annabelle. So I can't offer you more than that.
08:12No, I think I pushed that one far enough. I think that's right.
08:15But bigger picture, I mean, you're also active in the UK market. Are there any other regions or
08:21countries that are standing out to you, opportunities that you're seeing right now?
08:24Yeah, we see a similar flow of opportunities in the UK, largely on valuation grounds,
08:31as we have in other markets, similar to Japan. Germany's a market where we really see some
08:36value and we see some opportunities. And we look opportunistically across Europe and Asia and on
08:43occasion at the US as well. So there's plenty to keep us busy across these different markets at the
08:49moment. And you mentioned the US. And of course, it's a very difficult environment right now with
08:54just the constantly shifting headlines and the shifting rules around trade and tariffs.
08:59Is that making your life easier or more challenging?
09:02Look, I think it's an extra thing to think about from an investment selection perspective, Annabelle.
09:09One has to. We're now in a process where there's some legal review of President Trump's intended
09:16tariffs, and we'll have to see how that develops over time. But we're careful to look at companies.
09:21In fact, the one we're going to talk about today at the SONE conference is a good example,
09:25where however that develops, there's a good match between sales and production within the US,
09:32and so limited risk from a tariff perspective. And that's an important thing to keep in mind
09:36at the current time. So then just digging then into the sectors that you look at in particular,
09:42which ones stand out to you? So, you know, across the board, really, we have no particular focus on
09:49any particular sector. And, you know, I'm able to say the flow is broadly similar in a lot of different
09:55areas. So nothing specific that we're on the on the lookout for from a sector perspective, Annabelle.
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