Why investors are looking at ASX listed players: Future Generation LICs share price?

Summary

• LICs are closed-ended funds that operate like a managed fund and have a fund manager to choose and handle a company’s investments.
• The share price of Future Generation Global has risen 29% between 23 March-1 September, while the share price of Future Generation Investment has increased 37% between 23 March-1 September.
• Since inception, the investment portfolio of Future Generation Global has increased 9.2% pa, outperforming the MSCI AC World Index
• Future Generation Global declared a fully franked dividend of 2 cents per share, up 33.3% on the prior year, while Future Generation Investment announced a fully franked interim dividend of 2.6 cps, up 8.3% on pcp.
• In October 2020, FGG will invest $5.7 million into charities that will bring the total charitable donation of $19.7 million since inception, while FGX plans to invest $4.8 million towards charitable work.

Listed Investment Companies (LICs) are incorporated as companies and are closed-ended funds, i.e. they do not issue new shares or cancel shares as investors enter and exit the fund. The closed-ended arrangement permits the fund manager to focus on picking investments without any consideration of the money coming in or going out of the fund.

They issue a fixed number of shares in an initial public offering (IPO), and then investors buy or sell those shares on ASX. LICs operate like a managed fund, i.e. they have an external or internal fund manager who chooses and handles the investments of the company.

Do watch; What is Initial Public Offering? | IPO Explained

Let’s have a look at the performance of ASX listed LICs like Future Generation Global Investment Company Limited (ASX:FGG) and Future Generation Investment Company Limited (ASX:FGX), that have grown their dividends in June 2020.

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Future Generation Global Investment Company Limited and Future Generation Investment Company Limited are 2 stocks that provide investors with diversified exposure to Australian equities and make a financial contribution to Australian youth charities, accomplished by charging no management fees to stakeholders.

Future Generation Global Investment Company Limited

The share price of FGG has risen 29%, from a low point of $1 on 23 March to $1.29 on 1 September.

Recently, on 27 August, the Company released 6 months results to 30 June 2020, wherein the Future Generation Global investment portfolio outperformed MSCI AC World Index (which fell 4.4%) by 4.7%, rising by 0.3% during the period.

Some of the highlights of its HY20 results consists of the following:

• Operating profit before tax stood at $17.5 million, while operating profit after tax was at $12.3 million for HY20 ending 30 June showing an increased level of distribution income received from the investments with the underlying fund managers.
• FGG investment portfolio has increased by 9.2% pa, outperforming MSCI AC World Index.
• Fully franked dividend of 2 cents per share was declared, which would be paid by 23 October 2020, up 33.3% from last year due to availability of profits reserve and risk-adjusted returns of the investment portfolio during an unmatched period of volatility for equity markets.
• An estimated profits reserve of 6.8 cents per share was held, as at 30 June 2020, representing 3.4 years of dividend coverage
• During the six months period, the value of the fund manager’s foregone management and performance fees amounted to $3.4 million, while the estimated value of leading service providers working for FGG on a pro bono basis added up to $0.5 million.

Source: 2020 HY results, ASX dated 27 August 2020

Some of the youth mental charities supported by the company are Youth Focus, SANE Australia, Black Dog Institute, Reach out Australia, Brain and Mind Centre, Butterfly Foundation for Eating disorders, Orygen and Kids Helpline.

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Future Generation Global will provide its 5th annual investment of $5.7 million to its charity partners to support young Australians facing mental ill-health in October 2020, which will bring the total charitable investment to $19.7 million since its inception.

On 2 September, Future Generation Global ended the day, up by 1.55% from its last close, at $1.31.

Future Generation Investment Company Limited (ASX:FGX)

The share price of FGX has risen 37%, from a low point of $0.785 on 23 March to $1.08 on 1 September.

Recently, the Company released its half-year report, wherein it mentioned that the investment portfolio of Future Generation Australia surpassed the S&P/ASX All Ordinaries Accumulation Index (fell 10.4%) by 3.3%, however, it dropped by 7.1% for 6 months ending 30 June 2020.

Some of the highlights of 1H20 results are as follows:

• Operating profit before tax stood at $11.3 million while operating profit after tax was at $9.8 million for HY20 ending 30 June 2020, impacted by the level of distribution income received.
• The investment portfolio of FGX rose 7.3% pa since its inception, surpassing S&P/ASX All Ordinaries Accumulation Index by 1.8%.
• A fully franked interim dividend of 2.6 cents per share was declared, up 8.3% on pcp, due to sufficient profit reserves and franking credits, to be paid by 30 October 2020.
• The profit reserves of the Company stood at 8.6 cents per share as of 30 June 2020.
• The value of the fund manager’s foregone management and performance fees totalled $2.1 million, while the estimated value of leading service providers working for FGX on a pro bono basis totalled $0.5 million.

Source: HY 2020 Results, dated 27 August 2020

Some of its charity partners include Act for Kids, Lighthouse Foundation, United Way Australia, Mirabel Foundation, Giant steps, Australian Indigenous Education Foundation, Raise Foundation, Australian Children’s Music Foundation, Diabetes Kids Funds, Variety, Youth off the streets and DEBRA Australia.

In October 2020, FGG will provide its 6th annual investment of $4.8 million to its charity partners, working with Australian children and youth at risk, which will bring the total charitable investment to $21.4 million since its inception.

On 2 September, Future Generation Investment Company settled the day flat at a price of $1.08.