FUTURE GENERATION AUSTRALIA LIMITED — Net Asset Value 2017

Dec 13, 2017

Investment Update & Net Tangible Assets Report

As at 30 November 2017

Net Tangible Assets (NTA) figures

Net Tangible Assets (NTA) figures
NTA before tax 121.27c
NTA after tax and before tax on unrealised gains 120.30c
NTA after tax 118.45c

Portfolio

In November, the FGX investment portfolio continued to deliver sound performance, increasing 1.9% for the month, in line with the S&P/ASX All Ordinaries Accumulation Index.

Since inception, the investment portfolio has increased 10.0% per annum, outperforming the benchmark by 3.0%. The investment portfolio's outperformance has been achieved with less volatility as measured by standard deviation, 6.8% versus the market’s 11.6%.

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	Future Generation Investment	Future Generation Investment
	Company Limited
	ASX code	FGX
	Established Gross assets	Sept 2014 $427.0m
	Market cap Share price	$399.7m $1.14
	Net assets per share (before tax)	$1.213
	Shares on issue Management fees	350,578,294 0.0%
	Performance fees	0.0%
	Annual donation (% of NTA)	1.0%
	Annualised fully franked dividends (FY2017)	4.4c
	Fully franked dividend yield	3.9%

Investment objectives

• Provide a rising stream of fully franked dividends

• Achieve capital growth

The spread between the three broad equity strategies is 45.5% long equities, 37.7% absolute bias, 13.5% market neutral and 3.3% cash.

Future Generation Investment Forum

At the Future Generation Investment Forum in November, attendees were given 13 new investment ideas from some of the best Australian and global fund managers supporting FGX and Future Generation Global Investment Company (FGG).

Thank you to the following fund managers:

• Nikki Thomas, Magellan Asset Management

• Hamish Chalmers, Watermark Funds Management

• Douglas Tynan, VGI Partners

• David Prescott, Lanyon Asset Management

• Andrew Baud, Antipodes Partners

• Matthew Kidman, Centennial Asset Management

• Jack Lowenstein, Morphic Asset Management

• George Colman, ARCO Investment Management

• Mark Landau, L1 Capital

• Geoffrey Di Felice, Cooper Investors

• Matthew Haupt, Wilson Asset Management.

If you were unable to attend the Investment Forum you can watch a recording along with the presentation slides . The Investment Forum was also covered in the Australian Financial Review and in an article and podcast by Livewire.

November 2017 Shareholder Presentations

Thank you to those who attended our Future Generation Shareholder Presentations, we greatly enjoyed the opportunity to meet almost 4,000 of our shareholders. If you were unable to attend, you can access the full recording of our Sydney presentation along with the presentation slides , also available on our website.

• Preserve shareholder capital.

Company overview

Future Generation Investment Company Limited (ASX: FGX) provides:

• Shareholders with exposure to leading Australian fund managers without paying management or performance fees

• Charities focused on children and youth at risk with a consistent and growing stream of annual donations

• Fund managers with a unique opportunity to make a positive difference to Australia’s future generations.

Chairman Jonathan Trollip

Founder and Director

Geoff Wilson

Chief Executive Officer Louise Walsh

Directors David Leeton David Paradice Gabriel Radzyminski Kate Thorley Scott Malcolm

Investment Committee

Geoff Wilson, Chair Bruce Tomlinson David Smythe Gabriel Radzyminski Matthew Kidman

Company Secretary Mark Licciardo

Level 11, 139 Macquarie Street, Sydney NSW 2000 I GPO Box 4658 Sydney NSW 2001 I ABN: 97 063 935 553 Phone 02 9247 9202 I Fax 02 9247 6855 I info@futuregeninvest.com.au I www.futuregeninvest.com.au

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Investment Update & Net Tangible Assets Report

As at 30 November 2017

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Investment strategy allocation (% of assets)

Fund manager Investment Strategy	% of portfolio
Paradice Investment Large/Mid Cap Funds (split out below) Paradice Mid Cap Fund – B Class Long equities Paradice Large CapFund Longequities	11.5%
	6.5%
	5.0%
BennelongAustralian Equities Partners BennelongAustralian Equities Fund Longequities	10.7%
Regal Funds Management Regal Australian LongShort EquityFund Absolute bias	9.8%
Wilson Asset Management Wilson Asset Management EquityFund Absolute bias	8.8%
Watermark Funds Management Watermark Market Neutral Trust Market neutral	7.2%
Tribeca Investment Partners Tribeca Alpha Plus Fund Absolute bias	7.1%
Eley Griffiths Group Small/Emerging Companies Funds (split out below) Eley Griffiths Group Small Companies Fund Long equities EleyGriffiths GroupEmergingCompanies Fund Longequities	6.6%
	5.7%
	0.9%
L1 Capital Long Short/Aus Equities Funds (split out below) L1 Capital Long Short Fund – Retail Class Absolute bias L1 Capital Australian Equities Fund Longequities	5.8%
	3.2%
	2.6%
Cooper Investors Cooper Investors Australian Equities Fund Longequities	5.3%
Sandon Capital Sandon Capital Activist Fund Absolute bias	4.2%
BennelongLongShort EquityManagement BennelongLongShort EquityFund Market neutral	3.3%
ARCO Investment Management ARCO Investment Management(Optimal Australia)Absolute Trust Market neutral	3.0%
Vinva Investment Management Limited Vinva Australian Equities Fund Longequities	2.5%
CBG Asset Management CBG Asset Australian Equities Fund Longequities	2.4%
DiscoveryAsset Management DiscoveryAustralian Small Companies Fund Longequities	2.2%
LHC Capital LHC Capital Australia High Conviction Fund Absolute bias	1.8%
Centennial Asset Management The Level 18 Fund Absolute bias	1.7%
Smallco Investment Manager Smallco BroadcapFund Longequities	1.7%
Lanyon Asset Management Lanyon Australian Value Fund Absolute bias	1.1%
Cash and Term Deposits	3.3%

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Cash
3.3%
Absolute bias Long equities
37.7% 45.5%
Market neutral
13.5%
Long equities Market neutral
Absolute bias Cash
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Long equities – investing in a portfolio of equities based on the expectation that the underlying equities will increase in value within a certain time horizon. Each equity represents an ownership claim in an underlying company which is generally listed on a public stock exchange. The long equities portion of the portfolio includes exposure to large-cap, mid-cap and small-cap stocks.

Market neutral – an investment strategy that generally involves the simultaneous purchase and sale of equities, to generate returns that are not linked to the performance of underlying equity markets.

Absolute bias – an investment strategy that seeks to generate returns, irrespective of the performance of traditional asset classes. These strategies use innovative investment techniques (including but not limited to short selling and leveraging) to profit from rising and falling markets, providing portfolio protection in the event an equity market experiences a significant fall.

Level 11, 139 Macquarie Street, Sydney NSW 2000 I GPO Box 4658 Sydney NSW 2001 I ABN: 97 063 935 553 Phone 02 9247 9202 I Fax 02 9247 6855 I info@futuregeninvest.com.au I www.futuregeninvest.com.au

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As at 30 November 2017

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Fund managers

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Charities
Service providers
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Level 11, 139 Macquarie Street, Sydney NSW 2000 I GPO Box 4658 Sydney NSW 2001 I ABN: 97 063 935 553 Phone 02 9247 9202 I Fax 02 9247 6855 I info@futuregeninvest.com.au I www.futuregeninvest.com.au

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Investment Update & Net Tangible Assets Report

As at 30 November 2017

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Fund manager in focus: L1 Capital

L1 Capital is a global investment manager with offices in Melbourne, New York and London. The business was established in 2007 and is 100% owned by its senior staff, led by founders Raphael Lamm and Mark Landau. The team is committed to offering clients best of breed investment products. The investment team invests the majority of its personal wealth in L1 Capital funds alongside clients.

Our investment style

L1 Capital invests in high quality businesses trading well below their intrinsic value. The L1 Capital investment approach is largely style-neutral with modest value and contrarian characteristics. The proven investment process recognises the equal importance of both ‘value’ and ‘quality’ in investing. Our investment process combines discounted cash flow valuation with qualitative considerations such as management quality, industry and company structure and business trends to identify attractive investment opportunities.

The core of the investment approach is a high level of interaction with a wide range of market participants. This enables the investment team to generate the most complete fundamental, bottom-up assessment of each investment opportunity. Successful bottom-up investing requires a disciplined approach, detailed research and an independent thought process to deliver sustainable outperformance. Markets tend to be emotional, short-term and backward looking. Opportunities are continually presented to investors who are unemotional and long-term in their assessment of business potential.

Our market outlook

While equities appear fully valued, we believe the market could be poised for a relatively strong period ahead, given rising merger and acquisition activity, along with large institutional investors looking to shift their asset allocation away from bonds (which are currently offering no real returns). Volatility remains very subdued across all asset classes. Were inflation to rise from the currently contained levels, this would pose an additional risk. Investors should expect the slowdown of central bank asset purchases to result in higher sharemarket and fund volatility in the future.

Performance

Since inception in September 2007, the L1 Capital Long Short Fund has returned 36.9% p.a. (after fees). The fund has achieved outstanding risk-adjusted returns (maximum drawdown 2.4%, sharpe ratio 4.1, sortino ratio 24.4). The Fund’s cumulative net return of 177.4% since September 2014 was delivered with significantly lower volatility than the 22.8% return of the S&P/ASX 200 Accumulation Index.

L1 Capital Long Short Fund portfolio performance as at 30 November 2017

						Since Inception %
			1 Yr	2 Yrs	3 Yrs	p.a (Sep-14)
	L1	Capital LongShort Fund	29.7%	31.1%	38.9%	36.9%

Annualised returns and volatility since Fund inception date 1 September 2014.

For more information about L1 Capital, visit www.l1.com.au .

Level 11, 139 Macquarie Street, Sydney NSW 2000 I GPO Box 4658 Sydney NSW 2001 I ABN: 97 063 935 553 Phone 02 9247 9202 I Fax 02 9247 6855 I info@futuregeninvest.com.au I www.futuregeninvest.com.au

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Investment Update & Net Tangible Assets Report

As at 30 November 2017

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Charity in focus: Giant Steps

About Giant Steps

Established in 1995 for children and young people with autism, Giant Steps operates an early intervention program, a school-aged program, a college for young adults with autism as well as outreach and training programs. It operates in Sydney and Melbourne and does not charge fees. The cost per student at Giant Steps Sydney is approximately $90,000 per annum. There are currently 98 students with autism at the Sydney school and 12 students at the Melbourne school.

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Giant Steps and FGX

Thanks to the support of FGX, Giant Steps has initiated a project that focuses on how students with autism communicate using different strategies and techniques. Communication is one of the major challenges that individuals with autism face and we hope to decrease the resulting frustrations many students with autism experience. Data has been collected to track improvements and progress. Overall, there has been a marked increase in socially appropriate behaviour as a result of students acquiring improved communication skills. The Autism Hub, www.theautismhub.net.au , has been launched by Giant Steps Australia and contains a range of resources supporting a number of students across the spectrum. This site is freely accessible to anyone.

Q&A with Giant Steps CEO, Kerrie Nelson

What impact will the FGX investment have on your organisation?

The FGX investment has had an enormous impact on our organisation. It enables us to embark on ground-breaking research; it has assisted in the establishment of a new school in Melbourne; and, it has provided the opportunity to establish a much needed web-based platform for professionals in the field to share resources and information to allow for greater reach beyond the confines of the Giant Steps community.

What is the biggest challenge for the organisation?

Funding is the greatest challenge for our organisation. As a charity we continually need to fundraise and rely on the generosity of others to support our work. We do not charge fees and support students from all socio-economic backgrounds.

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What’s a burning issue in the area you operate in?

Over the past few years, funding has continued to be a burning issue. Schools have experienced huge changes with the introduction of the Gonski model and subsequent changes to the model. Likewise NDIS funding is having major impacts in the disability sector. As Giant Steps operates within the education as well as the disability sector, we are experiencing the impacts of changes as a result of new government initiatives in funding. Having a trained workforce able to support increased demand due to NDIS is a challenge. Developing a training unit where we can accredit staff is a focal point for future growth at Giant Steps. Dealing with increased demand and finding additional space for our services from which to operate is another a burning issue.

For more information about Giant Steps, visit www.giantsteps.net.au .

Level 11, 139 Macquarie Street, Sydney NSW 2000 I GPO Box 4658 Sydney NSW 2001 I ABN: 97 063 935 553 Phone 02 9247 9202 I Fax 02 9247 6855 I info@futuregeninvest.com.au I www.futuregeninvest.com.au

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