Future Generation Global Limited (FGG) Earnings Call Transcript & Summary

Hi. Good afternoon. My name is Caroline Gurney. I'm the CEO of Future Generation, and I want to thank you so much for joining us. So this is our Future Generation Global Half Year Results Webinar. Before we begin, I would like to acknowledge the Gadigal people of the Eora Nation, the traditional custodians of this land; and acknowledge the elders past and present on the lands on which I am sitting. I'm just going to come up with that disclaimer slide now, the ever important one. This is [ not about advice ]. But joining me today, I'm delighted to have 2 of our fabulous partners. We have Qiao Ma, who is a partner and portfolio manager for Munro. Hi, Qiao. Can I see you there? Hopefully, she's joining, but luckily, I can see Sarah.

[ Hello. Hi, there ].

We also have Sarah La Roche, from Smiling Mind, who is our not-for-profit partner who we're going to come to a little later. I'm also joined by Geoff Wilson. You all know the Founder of Future Generation and Wilson Asset Management. Hi, Geoff. You're there. That's good.

[ Hi. Yes ].

So Geoff is going to be wrapping up and answering any questions that I don't actually answer in the sort of the main body. So I just want to go very quickly to what we've just launched. We're going to go through our investment highlights in terms of the performance and the dividends, but I also want to note that we recently launched our amazing impact report for Future Generation Global. And that was where we actually looked at our 14 impact partners -- and when they basically had quite remarkable 5.3 million young people they actually reached in their programs. And I know a lot of you joined our Chair, Jennifer Westacott, to listen to that. And I want to thank you for that, but please, any of you who haven't read it, I'd really like you to have a look at it. So let's go now to our half year results for Future Generation Global, but I really want questions. So I'd like to make this as interactive if possible, so please do type them in. And we will get to them. And any specific ones for our [ not-for-profit ] partners [ or for ] Qiao or Geoff, please do write in. So I think now, if we turn to this slide which is in terms of our highlights, I'm not going to go through this slide for you because I know you can all read. And I know you will have actually gone through our press release as well, but I think the point to note there is our investment portfolio increased 11.6% during the 6 months period to the end of June. And this is at a time when global equity markets are being really led by that very strong performance of those mega-cap stocks, the U.S. technology stocks; the Magnificent Seven, they're called. And so I think it's really important that we actually know what we're investing in. And we really believe -- in terms of our investment committee, which are some of the great financial minds in Australia and fund managers, really believe that we're actually investing in an area, which is small caps to mid-caps, which is really targeted to grow. The number that isn't there on that slide, which is in the press release, which we've had some really positive comment on is our total shareholder return for 12 months. We looked at the 12-month [ piece ], was 19.3%, or 22.3% when adding in the franking credits. This has been driven by the share price performance, plus last year's fully franked full year dividend of $0.072 per share which you can see. So at the end of this period, the share price discount to NTA, net tangible assets, narrowed to 14 to -- 14.2% from 19.7% at the end of June. So we are very much committed as a management team to returning the share price to NTA or a premium. The big decision the Board, the directors made was to declare an increased fully franked interim dividend of $0.037 per share; and that will be paid on the 30 of October. So as you can see from this slide, the full year fully franked interim dividend provides that interim dividend yield of 5.6%. And if you gross that up, the dividend yield is 8%. And I think it's important to note that this dividend yield is significantly greater than both the average global equity market yield of 2% and the average U.S. equity market yield of 1.5%. So once there again you can see that we've paid, since inception, $0.381 per share in fully franked dividends; and that includes the value of franking credits. The other box. It's, at the end of July, we have 8 years of dividend coverage. And that's based on the cents per share, in terms of the profits reserve, of 59.1. And that's going to be before the payment of our -- the fully franked interim dividend at the end of October which I mentioned before. So let's go to the next slide, which this is the first time we've actually sort of showed our performance in this way, but we thought it was important to actually show you on the benchmark. So a 6-month period, the investment portfolio increased by 11.6%, as I said. And we also wanted to show you our performance against the MSCI SMID cap index, the SMID, because that actually captures the mid- and small-cap companies across 23 developed markets. And we really felt that this is comparable to future generations -- Future Generation Global's investments because we do have that bias, as I mentioned before, to small and mid-caps. And we're very underweight exposure to those big mega-cap companies. We've spoken before about our investment committee. And this is what they really believe is actually going to deliver sort of those outsized investment returns over the long period of time; and meeting, ours and yours, investment objectives. And we have 50 brilliant fund managers actually working for you, our shareholders, in a very disciplined investment approach which has been curated by that investment committee, which I -- which is thanks to them. That's a huge commitment they give us. And also to the fund managers that actually work pro bono. I want to go through our social investment. And then we're going to come to Qiao, but this year, we deliver our ninth annual social investment. And that's $5.9 million to our partners and other not-for-profit organizations, so we have now given $43.9 million. And in total, if you look at Future Generation Australia and Future Generation Global, I can now announce the number of $87.2 million since inception, which is a staggering sum. And we do this because, our fund managers, our investment committee, our Board members, our accountants, our lawyers, the people that make our videos that we send out to you on a very regular basis, they waive all of their usual fees. And if you actually add all of that up, this is a -- I would like to say it's an estimate, but I think it's a very -- the way I would say that it's a -- the way we've added up is quite -- it's not as much as it possibly could be because we wanted to show you that we've actually -- in terms of the cost, it's $9.2 million per annum that have been saved in terms of those fees. And that's 1.6% of the net assets of the company, so these savings to you, our shareholders, they actually exceed the annual investments that we gave to our impact partners. Because we give that 1% of our company's net assets per annum. So I want to thank you, our shareholders, for your commitment really to doing good and, hopefully, doing well. And I just want to -- the number that I've spoken to you. And if you want to speak to me, please do call me, but I know that the social impact is important. But it's very important to make sure we actually get those financial returns to you, which I really think that we are doing. So I'm now delighted to be joined by Qiao Ma, from Munro. Qiao, are you there?

Can you hear me? Hello, everybody.

Yes, I can hear you. Brilliant. So Qiao, we've spoken a lot. In fact, you did a brilliant talk for us when we were in Melbourne. And that was covered by the AFR. And James Thomson, who is the chanticleer columnist, actually interviewed you as well for the Future Generation panel. And we talked a lot there about AI, so that's the question. We're getting questions from various people on that. Is AI over? Have I missed it? Where do I get in? And obviously this is an area that you invest in and you're an expert in it.

Yes. Thank you for having me here. It's always great to speak to you. And look. We get this question quite a bit, especially over the past couple months, when the market tend to be a little bit more volatile. And the answer really is the same. We really haven't changed our view since I met a lot of you a few months ago at Melbourne. And frankly, forget about is AI over. AI hasn't really started yet. So I think we talk a little bit about this, but we really studied the past cycles of technology. We went back for 50 years. We really went to the birth of transistors and semiconductors in the '60s, and we identified these really long cycles. There was the mainframe. There was the PC. There's the smartphone. And for enterprises, there's the cloud. And really, on average, each one of these cycles lasted, give or take, 10 to 15 years. And we're 18 months in of AI cycle. And in a lot of ways, we think this cycle could even have the potential of being even bigger and more transformative than those previous ones. So really we are really, really early. All the talk about the AI -- and I'm sure we'll talk a little bit more on just the applications. All the talk on AI, so far, is still just on the buildup of the tools. We haven't even gotten to the part where a lot of these tools are being put to use. And we start to see applications where they are being put to use, and it's just like magic, so we're still really excited about this. And yes, we are super early in the cycle.

So I actually have -- I'm going to actually start asking these questions as they come in because there are some good ones, but -- so [ Ross ] has asked. And you've answered some of it, but do you believe -- the 7 tech stocks, the Magnificent Seven, have they run their race? And if so, what sectors do you see value in internationally? So I mean obviously one of them hasn't done as well as others, so -- [ I mean, are you in a ] position to go through them all, if that's possible?

Yes. I mean look. So maybe just a way to sort of frame the question. So I think I understand where it come from, but obviously you have to specify the time frame. And have they run their race this week or this month or this year? Or we have a longer-term view, but if we just take a step back: We are growth investors at Munro. That's what we do. We eat and breathe and come to work every day looking for growth companies. And the one thing that I just want to point out to everybody is it's really hard to grow. Most companies in the world do not and cannot grow, so find these really long-term structural trends. And then find these winners, which many of the Magnificent Seven is in. This is an incredibly hard thing to do. And these are not the winners that were created in 2022 or 2023. I mean, most of these companies, their success is like 30 years in the coming. And they have an incredible, dominant market position in the structurally growing trend that we think is going to continue. So I guess, from that angle, have they run their race? I mean the race continues. And we think that these companies probably still have a really good shot at winning the race. So definitely not running its course, but then the second thing, which is a much more near-term thing, is on valuation and expectations. And frankly, on valuation, especially after yesterday, some of you might have looked at the tickers since then. The valuation has come -- really come in. So Amazon, if you look at on the free cash flow basis, this is attractive as a valuation that Amazon has ever traded on in its entire history as a publicly traded company. So valuation is becoming a lot more reasonable. And then expectation really is the third one. And I think this is really where the expectations potentially ran ahead of the companies. So the earnings season that we just wrapped up: Really sort of with the exception of Tesla, which is I think what you're implying is the exception, it's a clean sweep for 6 out of 7 companies, clean sweep of great earnings growth that clearly exceeded expectations set by the market, yet the stock didn't quite do well because the expectations have really gone so lofty. So I think that just -- basically, sadly, that's just how the market works. The expectations sometimes go ahead. The expectations sometimes lag, but ultimately if you actually look at the structural growth tailwind behind these companies and their market position, yes, we think that, the Magnificent Seven, you still get at least 5 winners in there.

So let's sort of continue on the AI because I'm getting a couple of questions on that still. Is it -- it's not really now a pure tech play. It's actually more -- it's gone way past technology. And how is that? And what do you see the progress of it?

It is so exciting. And I'm so glad that you talk about this. Is -- when we really came to talk to you the last time, we were really encouraged and excited by the buildup of AI. We got to see how many hundreds of billions of dollars basically poured into the industry by some of the smartest people in the world, and saying, "This is the incredible tool that I have to build and I really have to build for my future customers." What we end up seeing now is really the enterprises, the businesses, the ultimate users of this tool start to line up outside of NVIDIA's door and start to say, "Let me use AI to change my businesses." And we start seeing AI being used in some of just the most fascinating cases. And we start investing with these companies that really is not even in the zip code of technology companies. I'll give you 2 really good examples. One is we invested with this imaging center chain in the U.S. that has been operating a couple of hundred imaging centers for the past 40 years. They basically pull all the data together and they put it through an AI algorithm. What they end up having is an imaging AI reader that can basically detect cancer, call it, 18 months earlier than human eyes can; and with much lower false positives, so you don't send your poor patients to go through a very expensive and intrusive biopsy and sit there shaking for a few days until the false positive is confirmed. So they rolled this out to all their female patients for mammogram in New York City, and within a few months, 40% of the women that walked through the door for a mammogram went out of pocket. This has never happened. Since everything in the U.S. is covered by insurance companies, patients never pay anything out of pocket. 4-0, 40%, nearly half of the patients actually say, "Yes. Swipe my credit card for $40. I want that AI reading," because it's just such a no-brainer. And now it's going to roll out to prostate screening. It's also going to roll out to lung cancer screening. So screening imaging, we think, is going to be forever changed because of AI. Another really fascinating example is another company we invest in is actually a security company. So it is a monopoly making Tasers for state and local police. And then gun violence is a really big thing, so basically, pulling a Taser out avoids the policemen pulling a gun out in a conflict. And because it has the Taser product, it also has a body cam product so that, the minute you pull your Taser, your body camera turns on and recorded everything. So then 4 months ago, this company used an large language model to basically turn the videos recorded by the body camera into a police report. So these become the first draft of the police report; and actually have the details of everything. "In exactly 2:08, something happened. Someone said this. Taser gets pulled. Suspect did this. Police officers did that." And that first draft of police report basically save, on average, 2 hours of police time. And in -- and the state where the police is understaffed, they basically just save them a tremendous amount of time. And they can spend that time patrolling instead of writing reports in front of a desktop. And they start charging additional software subscription revenues. And this is incredibly well received. So these are just 2 examples that we start seeing AI being used completely outside of technology by normal businesses in their core businesses and core competencies, which is just fascinating to us.

You're right. I mean it's so -- it's incredibly exciting, but let's look at markets because obviously they're still very macro-driven. And when you've got Powell putting a September rate cut, hopefully, on the table, what are you expecting from the Fed and other central banks as well over the next 12 months? And how is that going to impact markets, do you think?

I mean look. I think, comparing to even 6 months ago, we have a lot more policy clarity. So Powell basically indicated we are entering into the easing cycle in a couple of days, so -- and we think this is likely going to be a coordinated easing cycle globally. Why? Well, the core inflation that the central banks is tracking in the U.S. is now 2.5%. And the Fed rate, Fed funds rate, is still 5.5%. And long-term interest rate is much lower than that, so it just makes perfect sense for the Fed funds rate to come down, but really what it says -- and usually, obviously, in a easing cycle, that's helpful for the stock multiples. And that's helpful for growth stocks, but probably even go deeper than that. I mean we've really flipped from an inflation scare to a growth scare for a global economy. Growth is going to be the real scarce assets. And back to my earlier comment, it's really hard to grow. So if you look at the broader economy really outside of AI and innovation, you just don't see a lot of industry that's structurally growing. And it's really, really hard to find them, so I think that's really how we think the setup is. It's actually really supportive for the real growth stocks that can really show healthy EPS and profit per share growth. And that's why we are excited. And we think this is a really good time to be a growth investor.

So we've got this incredibly narrow market which we've spoken about very concentrated in tech stocks. What's your view on sort of big cap versus small caps? And where are the other opportunities?

Yes. So we like small caps. So we like small caps for 2 really sort of simple reason. One is their -- the valuation is just incredibly attractive. So comparing to the larger-cap peers, if you just look at the valuation gap between small caps and larger caps -- I mean small caps is as cheap as they've ever been in about 20 years. So the last time they were this cheap was right after the dot-com bubble. So that really sort of was an interesting valuation setup, but to us as growth investors, what excite us even more is really to see the reacceleration in growth and to see that the AI innovation-driven reacceleration in earnings is broadening out to smaller companies. So we are excited about them because we start to see the profit growth coming through. And then we think that, if they have just a little bit of help in multiple with the profit growth, they're going to do incredibly well. So that's really why we like small caps, but ultimately to us the debate is probably a little bit less about large cap versus small caps. To us, the way we think about the world truly is we think there are a couple of very definitive structural tailwinds that is really driving the growth. And within the growth tailwinds, you will have larger company that win. You'll also have smaller company that win, but outside of the definitive growth tailwinds, it's much harder to grow. So that's really how we define our space as areas of interest. And that's really how we do a lot of deep work up and down the market cap in the specific trend that we like.

So you've obviously given us a few companies that you really like. So what would be 2 top stock picks? Because our shareholders love stock picks. And why? And also maybe illustrate your process through one of them would be great.

Yes. So I'm going to be really boring. One of my top stocks is still NVIDIA. And...

I'm -- can people buy NVIDIA now? That's -- I've got a question. Can I still buy in? I mean you've had it for the long term.

I can't give an investment advice. I will get a massive slap on the wrist, but we still like NVIDIA as a stock for really simple reasons. So we keep getting asked the question, "Who's the next NVIDIA? [ I missed ] NVIDIA." And our answer really has not changed. When you have these massive structural winners is really, really difficult for anyone else to catch up. Because not only NVIDIA is, call it, at least 2 years ahead of everybody else. NVIDIA is still moving faster than everybody else, so it's an incredibly difficult race to catch up. So we think NVIDIA is going to capture the lion's share of profits that it's going to make out of the AI chips and AI hardware which is really the key to power AI. And NVIDIA is also incredibly profitable. So at today's price, I think the NVIDIA closed at $108. And it's going to [ make about $3 ] of this financial year. And there is a very clear line of sight for that [ $3 ] to get to [ $5 ] just from the product road map they've already announced and the backlog they already have. So NVIDIA is really trading at roughly 20x that number. And I'm going to say, especially in an environment where interest rate is going to drop, 20x to pay for the leading company in the world, possibly the most important company in the world, is not a stretch to pay for. So we still really like it. It's still one of our top picks. Another one that I actually really like, it comes a little bit [ out of the left ] field, is a company called SharkNinja. The ticker is SN. It trades out of New York in the U.S., is a Boston-based company. And any listener or audience at this webinar, I would just encourage you to wander over to your kitchen and to your bathroom. Most likely, you will see a Ninja-branded product, either a blender or a multi-cooker sitting on your kitchen counter. Or you have a Shark, either a hair product or a Shark vacuum, sitting somewhere else in the house. And that's really the 2 main brands that it operates. And it's just one of those really incredible consumer companies. Like SharkNinja just reported they grew over 30%. And this is in a wild consumer recession when the budget is getting pinched and everything. Really the key to success is their incredible innovation engine. This is a company that just consistently come up with new products. They expanded into 2 or 3 new categories every year. It is just catching the attention of the consumers outside of the U.S., so they're growing like wildfire, doubling their sales in markets like Germany and France and Brazil. So it is a really great little self-help story. And because of the concerns on consumer and reception, it's also really, really cheap. So SharkNinja right now is trading at 18x price-to-earnings, growing 30%. So here you go, my 2 top stocks, going from NVIDIA with 200 billion transistors on a chip to Shark hair product.

And also one of our shareholders has asked. What was the name of the imaging company in the U.S.? What's the ticker?

The ticker is RDNT. And the name of the company is called at RadNet, R-A-D-N-E-T.

Thank you. So another question that I've got, from [ Sam ], is the Magnificent Seven are all engaging in massive capital expenditure. Could this be a drag on tech earnings for the next few years?

It's a really fair question. And I just want to sort of maybe take a step back and talk about investment. So the first thing is, Magnificent Seven, these are cash flow generative machines. They are all capital light in their businesses. So think about Facebook as a social network. Even Amazon, over time, may become a lot more capital light as a business model. Google, obviously this is search engine, incredibly accretive. So there is this culture; and Jeff Bezos, Amazon famously coined this. It's called invent and wander. I think they have to invent. They have to innovate and they have to try different things. And the new things that they're trying. I'm sure you've heard Facebook going on about metaverse. That's $20 billion a year, guys. And Amazon is now going back into satellite-linked connections, sort of trying to give Tesla a run for his money. So they're always having these interesting futuristic investment projects. And by definition, at the current state, these investment projects do not generate return on capital as high as their current business. They wouldn't be experimenting innovation otherwise, but in that context, the capital expenditure, the CapEx, on AI is actually generating incredibly high ROI, so I actually find it somewhat amusing that people are giving Facebook a hard time for investing in data centers while he's free to spend $20 billion on metaverse. So the short answer is we are already seeing the return on capital from AI for these Magnificent Sevens. Why do we know that? Well, their earnings are reaccelerating: Facebook, a $150 billion revenue companies, used to grow 7%, now growing 20% because their AI-generated recommendation engine is working better. So we are actually seeing the return on AI spend on a real-time basis. So we actually think this is the highest-ROI spend they possibly could. I would love them to cut off everything else and spend more on AI instead.

Excellent. Thank you so much. I think that's all what we have time for, but if there are any other questions that come through for Qiao and -- we will answer them accordingly. But thanks so much, Qiao. I really appreciate your time and the fact that you work pro bono for Future Generation Global, so thank you.

Thank you for having me. It's always a joy. Thank you.

Thank you. So now let's move to Sarah. Sarah, can I see -- are you there? Are we good?

Yes, I'm here. Hi.

Brilliant, brilliant. A lot of our shareholders and, I would also expect, many of their family members would probably have used the Smiling Mind app. I mean I know I have.

Yes.

But for those that aren't aware of the incredibly important work that you do, maybe talk us through the app. And what -- how does it help people? How does it help young people pair and sign one of the -- like give...

Sure. I use it myself with my own children. Thank you. And that was really fascinating to listen to, all of that market commentary. So look. I think it might help, first, if I just give a little bit of context about the environment that Smiling Mind operates in and some of the problems we're seeking to address with our app and some of our other tools. You know and maybe many of the shareholders here know we're in a mental health crisis in Australia. And unfortunately, that extends to our young people and our children, with 1 in 4 young people experiencing signs of mental illness, which is a staggering number. And it is getting worse, unfortunately. We know that 7 in 10 presentations to pediatricians are for mental health issues, and only half of those people are actually getting the help that they need. And that is combined or supplemented with the fact that we know that 50% of all mental illness has its onset by age 14. So we know that mental ill health in childhood and adolescence is associated with poorer life outcomes, academic performance, employment, more likelihood to come into contact with the justice system, et cetera, so all of those things combined tell us that, if we focus on prevention and in the early years, we have the best chance of setting kids up for a happy life and in turn, hopefully, change the mental health landscape in Australia. So that is why we exist. We take a system-level approach to support well-being for kids and the adults that surround them. And we do that for schools and the home...

So what's the system-level approach?

Yes. So that means that we really look at pathways that we can reach children in the systems that surround them. So as opposed to directly engaging with kids, we try to work with the adults that are supporting them, so that looks like schools and home, educators and parents. So our app that you spoke about is our most well-known tool. We've reached 9 million people globally, which is amazing because really a lot of that, almost all of that, in fact, just come from word of mouth and speaks, I think, to the efficacy of the tool and the practicality of it as well, but we also have our dedicated digital program for primary schools which is in [ about 1/5 ] of schools. And we are aiming to reach every school in Australia. So in terms of how it helps and where we're going. Like all of our tools, the app is informed by research, testing and evidence. We have a whole team of psychologists and mental health experts who evaluate evidence globally and work out how can we turn this into engaging tools that people can access through technology. And when we launched, we were absolutely a pioneer in combining tech and mental health together. We've recently evolved and expanded our app, and it reflects our new mental fitness model. So in -- mental fitness to us is the definition that essentially when -- in the same way that you strengthen different muscles in your body to build physical fitness, mental fitness is built through practicing a range of different psychological skills. So these skills allow us to respond to setbacks, sustain healthy relationships, navigate change and uncertainty and ultimately make better decisions, so we seek to empower people with the skills they need through our app and through our school program...

So somebody goes on to your app, obviously downloads it. What are they going to see? What's their initial experience?

So it's completely free, available 24/7, obviously. It supports individual adults as well. So we want everyone to thrive. And we know that enabling adults, primarily those who come into contact with children, is the best way that we can do that, but an individual adult can also find tools to support them. So the relaunched app, there is a really amazing search function. You can search for basically anything you want. I search for different things for myself, versus my kids, but it's set up in a way that you can search based on your needs, so whether you're feeling stressed or anxious in a particular moment or whether you're actually utilizing the app proactively and want to build mental fitness skills, so you can search by our mental fitness model. So that might be around mindfulness. It might be about building purpose in your lives or better relationships with your friends, also physical movement. And there's a range of different types of content, so there's mindfulness-based meditation content, but now there's also tools, activities, things like that, so that we can appeal to a broader range of people as well.

So you obviously have done this amazing, well, State of Mind survey. And you're sort of -- I think it's in your third one. I mean obviously you can't talk about the results now because they're not going to be released through November, but what are you seeing on the ground? What is actually happening to the well-being of young people and Australian families? I mean it seems to be getting progressively worse.

Yes, sadly, yes. So our State of Mind survey is a thought leadership initiative that we run every year or 2. And it's essentially a state of the nation, so we survey nationally significant population of adults and children to help us understand what's happening in the community because, sadly, the government hasn't done that in the last 10 years. So the last time there was a national survey on child's mental health was 10 years ago. They have committed to do another one, but it won't be in market till 2027 and therefore not able to influence policy or any outcomes in the community, so Smiling Mind and through the support of FGG is able to -- is self-funding it this year to actually do it ourselves so we can start to be able to say, "Hey. This is getting worse." So I suspect that the findings, whilst they're not ready yet, will show us what we're seeing on the ground, which is that there are increasing rates of childhood mental ill health. And there's a continuing trajectory of young people experiencing mental illness at record levels, which is really, really concerning. So we do know that Aussie kids aged 6 to 12 are experiencing rising rates of mental ill health. So between 2020 and 2022, social anxiety disorder increased by 45%, ADHD by 42%, peer relationship difficulties by 39% and educational learning concerns by 35%, so we do a lot of advocacy work. And through that work, we hear firsthand accounts as well that just reflect those statistics. So whether it's youth workers or educators, they tell us that they've seen drastic increases in youth mental health (sic) [ ill health ] and also the lack of services that are available to support those issues. We're also seeing parents struggling significantly. And we heard from some at the FGG conference last week who are really struggling to know how to access support and care for their children. We know that primary health care is completely inundated and unable to meet demand. And that's based on our current understanding of the problem, let alone future, which is why it's so important to be focused on prevention, which FGG is obviously supporting. So we hear from parents all the time. One parent told us they're on 4 different wait lists and they are not expecting to hear from any of them back for the next 6 to 12 months. Another said their child is in desperate need of a psychiatrist. And there isn't one in the State of Victoria who will take her on, so it feels sometimes like an overwhelming tsunami of a problem, but there is hope. And programs like Smiling Mind's do make a difference. And we will continue to do so with support of organizations like FGG, where we can actually seek to improve or increase the amount of funding that goes into prevention at a government level. As you know, it's only about 1% of all funding goes into preventive initiatives. And so together, we're advocating for change at a government and systems level for that, but there certainly is hope. There's proven programs like ours out there that are independently evaluated that we know can make a difference and so we just continue our mission to help grow them.

I suppose, when I look at our impact report that we did; and the fact that we're -- between you and our 13 other not-for-profit partners, we're reaching 5.3 million young people, I mean, there is definitely an impact happening. It's just how that plays out, but one thing, last year, that you called for, which we actually backed you on because -- think it's an amazing idea, is a children's minister. We talked about, we've talked about, obviously, getting young people involved in decision-making around what the spend should be. Why do you think that's so critical? And how does it help if you have young people and more people lobbying and having a children's minister? Is that going to make a real difference...

Yes. When you think about it, it's a travesty. That doesn't exist at the highest level of government already. There's no one advocating directly for the needs of children and particularly through the lens of mental health and empowerment, when we know where the statistics around child mental health are at, and so enabling kids and young people to have a seat at the table is critical. We know through our own research that, when you ask children and young people about the issues that affect them, their insights about what's important for them and what can work for them can change the trajectory of program design for the better. And this comes down to the language that they use, the way they want to access services. We know there's a generational divide in the people who are making policy decisions and the people who are designing programs for young people and not involving young people. And essentially that affects impact, but essentially we're driving for that impact. And when we called for a minister of children, we really want somebody who could listen directly to the voices of children and young people in that capacity and advocate on their behalf or, ideally, elevate them to be able to advocate for themselves. So young people have incredible resilience and hope. They have ideas for how they can make things better. And there are actually quite a lot of good advocacy groups focused on young people aged 13, 14-plus. They're articulate. They're impressive. They want to be involved and have a seat at the table. Our focus at Smiling Mind is more on that younger audience group, so 5 to 12. And our goal is to be able to support a group of younger children and their parents to also have a voice because their needs are different. Their ideas are different. And often, their voice is left out of the disclosure because of ethical reasons and so on, so setting up an advocacy group for that cohort as well as a minister for children would absolutely be game changer.

So one final question, so -- but thank you so much. I mean, one, what is your long-term objective when it comes to your impact?

I mean ultimately it's in this mental health crisis. So Smiling Mind, as I said, operates at a system level. And our goal is to build skills in children and young people to support them on that journey, so we take a very proactive, positive approach. And that's where this concept of mental fitness comes in, which is that we want everyone to feel like they have control and empowerment over their ability to build positive mental health in their lives and for their families. And so short term, our goal is to make sure that every Aussie kid is equipped with the mental fitness skills and strategies they need to lead happy lives. Whether you're mentally healthy or whether you're susceptible to a mental illness, our programs aim to empower both of those audience groups so that, long term, we live happier, healthy lives; and a different type of society, so yes, I'm excited about the future and the possibilities.

Thank you so much. I think that's what we're all working towards, without a doubt, but thank you very much. Thank you for being on our webinar. And we'll speak to you shortly.

Thank you.

So I now want to make sure that everybody is putting in their questions to the question panel. And I now have Geoff joining us. Geoff, are you there?

Yes, [ all good ].

Excellent. So I mean, Geoff, we heard a lot there in terms of -- from Qiao in terms of investing, looking for those sort of smaller companies that she wants to invest in, in terms of the AI space. One of the questions that we have in terms of the investment committee and how we actually invest in that small to mid-cap and our investment philosophy, would you care to comment on that?

Well, why don't -- I'll comment on it, but maybe I'll give people just a bit of perspective in terms of understanding how the portfolio is put together. You've got the investment committee which decides the allocation to the group of fund managers we've got or taking it away from some of the fund managers we've got and giving it to other fund managers. The great thing is we've got maximum flexibility, so our focus is get -- to get the best global fund managers for FGG that are going to perform for shareholders. Now in terms of perform, what do we mean by that? Some people think it's by in terms of buying shares that go up faster than the market or giving money to managers that deliver that. What we've done with FGG, and this is same with FGX, is we've put together a portfolio sort of like an all-weather portfolio that -- and what we've done is, with some of that money, the investors' money -- and with FGG, it's about 30%. We've given to key managers that have -- that are trying to perform on an absolute basis. And what does that mean? That means, when the market falls, we actually want them not to fall. Or -- and when the market rises, then we want them to rise, probably not as much as the market. So for that group of managers, which is about 30%, we're looking for about a 10-odd-percent return over time, maybe a little bit more, but obviously taking a lot less risk. So if you look at the performance figures for FGG. And I know you talked about it before and you talked about the MSCI. That's one part of it and -- the small and mid-caps, but you've got to look at also how are they performing on an absolute basis, so what we're -- the focus is to give you -- take less risk in your portfolio and perform better than you could yourself. And that's what we're trying to deliver, so in terms of what areas of the market are we exposed to, you tend to find active managers and index funds. So look. If you want to get broadly index performance with index risk, then look to invest in an index fund. If you're looking for a different risk profile, which I mentioned -- so in terms of a bit more downside protection, that's what FGG gives you. And because of the active managers that we've given the money to, then they're looking at trying to buy those sort of growth companies before everyone finds them. So you tend to find they tend to not have the -- they don't have big weightings to the top 2 or 3 or 5 or 10 companies because they're looking to find companies that they believe will eventually be those companies. We're talking about NVIDIA. That's obviously in the top 7, but by default, our portfolio managers is underweight the -- on a global basis the Magnificent Seven -- and so a lot of the passive money. Passive money just buys whoever the biggest. It gives the biggest weight to the biggest company. And that's what broadly the passive money delivers, so what we're hoping is our guys are going to perform better than that over time, with less risk.

Excellent. And the next question we've got, from [ Alan ], is the discount to NTA is narrowing now. Why do you think that is?

Yes. The -- well, why is it was narrowing? I mean broadly it's sort of very simple economics. The value of FGG is the NTA, so if the NTA is $1.53, that's the value of FGG. If it happens to be trading in the market at $1.30 or something like that or $1.33, that's the market price, but what is FGG worth? It's the NTA. And we announce the NTA on a monthly basis. And then I mean you've got to assume we perform broadly in line with the index, if you want to look at that, of how the NTA has changed. And really the fact that the share price -- whether the share price trades at NTA, if not a premium, and FGG a few years back was trading at a premium to NTA, it really is all about supply and demand. Now you mentioned that the discount has narrowed. And we believe it will continue to narrow till it gets -- starts trading at NTA, if not a premium. You could argue -- and if you look at the numbers in the announcement and even in the slides, you as an investor, you're getting exposed to these fund managers and you're paying less than you would normally pay. And that less -- how you work that out is you look at the -- one of the -- if you've got the figures there at your fingertips -- I just haven't got the slide in front of me, but the millions of dollars that you would have paid to the fund managers for their performance -- and that's minus the millions of dollars that we've given to the charities. Have you got them your fingertips there...

Yes, yes, yes. So it's $9.2 million per annum in terms of those fees forgone, which is obviously 1.6% of the company, so yes, that's [ a good statement ]...

And then 1% goes to the charities, so you're effectively getting nearly, what's that, a 33 -- or nearly 36% discount, yes.

Yes.

So you're getting exposed to these managers 36% cheaper than you should. So what my belief is, assuming you're happy with these managers, then that's an embedded reason why FGG and FGX, over time once it gets to -- once the supply-demand equation sort of stabilizes and they start trading at NTA, the medium, long term, they should be -- they should always be trading at a premium. And as I said, both have traded at premiums historically. There's -- Caroline has been in the chair for the last few years. It is supply, demand. We did raise some money a few years ago. We're in the process of engaging with shareholders, making sure they understand what they've invested in and broadly tightening that share register up and so there's less supply. And if we can still continue to drive the demand, then we will get them trading at NTA, if not a premium. Now historically, at Wilson Asset Management, we had one entity that traded at a discount for probably 7 years. And it took us a long time to get it to trade at NTA. And in the end, we probably did too good a job because we...

[ Ground reset ]...

We [ rusted ] on all the shareholders. And then like a couple of years ago, it was trading at something like a 58% premium to NTA, which is as ridiculous as trading at a -- say, FGG which is trading at about a 13% discount at the moment, yes.

It is, yes. It is. So one other question that I've got on is you're saying that you have a good profits reserve. So in terms of how the Board thinks about paying the dividend, with a large profit reserve, why wouldn't you lift the dividend higher? That's from [ Jane ].

Yes, well, yes, that's always the discussion. And on a regular basis when the Board members at the Board meetings are -- we have the Board meetings, that we look at all the -- we look at capital management. Now that includes buybacks and what dividends, profit reserves, et cetera, et cetera. And with the strong profit reserve, well, one thing is you've got to remember, with Future Gen Global, broadly it's when -- we're not getting fully franked dividends because it's investing in global equities, so it's when we pay tax. And that's when we -- if we're with a manager and we've decided that they -- for a reason either that, yes, they've underperformed or there's a management change which we think will be bad; or we decided that they don't fit into the portfolio anymore; and we remove them, then effectively there's a tax event. And we pay the tax and then we have franking credits, so -- and what we're trying to do is give you, shareholders -- and I know Caroline said, her early part, how you're really getting a lot better fully franked -- well, a better yield than you would in investing in global equities. And that's really a combination of realized profits and unrealized profits given to you over time and franked by the amount of tax -- by the tax we've paid. So the plan is -- and if the market on average does 10% or -- over time, then what we're trying to do is give you a combination of a reasonable-sized dividend, but also we want some capital growth. Like if we were -- at the moment -- I think Caroline talked about the numbers. It was at around 5% on assets and 7-and-a-bit percent pre tax. We've got to make 7-and-a-bit percent to be able to pay the tax and pay you a fully franked yield of about 5%, so if the market on average does about 10% then 1% goes to charity -- and so there's a couple of percent left for capital gain, so the plan is to gently increase these dividends. They're at a level that I think the Board is pretty comfortable with. And then like the year we've just had, the portfolio has done better than that 10%, so you've got more in the way of capital gain. And I know Caroline did talk about the shareholder -- the performance, total shareholder return. We're, from a Board's perspective and, I know, Caroline and the team, from a management's perspective, very focused on making sure that, Future Gen Global, if it's got $1.53 of assets, then the share price is at least $1.53. If not, as I said, you could argue there's an implied benefit to all shareholders, so you'd want it to be trading at a bit of a premium to that.

I mean, as you said, I mean, that's something we're really committed to, so we're calling our shareholders at the moment. And if you want to talk about anything, please do call, but Geoff actually mentioned the donations to charity. We had a question from [ Gary ] saying -- and it's actually for FGX and FGG, Geoff, in terms of have we considered increasing the donation to charity from 1% to 1.1% of assets. I mean, when you were originally deciding on 1%, how did you get to that?

Yes. It was really, well, the model that I looked at -- there was a guy, Tom Henderson. I don't know if -- anyone who's been around for a long time. I think his great grandfather set up Henderson asset management in the U.K., a very successful fund manager back in its day. Anyway, he was setting up a company in the U.K., which was listed on the stock market, and was getting a whole lot of hedge fund managers to manage money for free and then giving 1% of the assets to charity, so I just thought, what a great structure to use. And he was -- his ratio was a lot -- was higher because the hedge fund guys at 2% -- a lot of them 2% management fee and 20% performance fees. So when I sort of went through our -- a lot of our managers have performance fees because they're small. They're boutique. They might be closed. You can't get in with them. So they can -- they believe they perform so they can charge that. And he was of the view that we were at the top end in terms of giving that 1% away. Because to me, in theory, you want them to be an incentive. We want these structures to grow and prosper, and so there must be an incentive for the investor. And the incentive for the investor. If -- like if you'd like this group of fund managers, then as I said, you're getting nearly a 40% discount on what their normal fees would be. You're definitely not paying any performance fees and broadly it's just a management fee. So I know, from the charitable side, and I'm sure [indiscernible] on the metal health prevention side. And [indiscernible] we know what an incredible problem it is that we would like to give them more money. To me there has to be that balance for the investor and for the charity. To me it's a win-win-win. One of these fund managers manage the money pro bono. The great thing about the funds management industry is it is a very large industry. So you could be managing $5 billion, $10 billion. You can manage $100 million or $200 million in your normal pool, and you can do that for free. It doesn't create a big cost for you. It's not like you're a builder building houses or an accountant seeing clients or a doctor, et cetera, et cetera or a nurse or a teacher, so you're not selling your time. So that's why it works, and to me -- it's a win for them. They love being involved. And we've got the best, we think. So there's something positive about that for them. And also it's a big win for the charities. They're getting money over time. And we heard earlier today just the sort of the work that has to be done on the prevention, on the metal health prevention. And then it's a win for the investor. And the investors -- I know we've got hundreds on the call today. It's important they understand what they've invested in because we want them to stay there and grow with us.

So [ Sam ] has asked: How do you decide the number of managers used by the fund? Is there a trade-off between the increased costs of administration and diversification between different managers?

Yes. No, there's actually -- there's not actually a direct trade-off there. With FGG, there's about 15 managers. And the logic of -- and broadly we're picking managers to do a certain job. Now if they're not doing that job -- I mean the interesting thing from an investment committee perspective. When you give money to a manager, you're actually giving it to the lead portfolio manager to manage on your behalf. So if that lead portfolio manager goes, then obviously it's immediate on review. And we may take the money off. And I mean, FGG, we've done a lot of work on the various managers. And Caroline, do you know how many we've added and subtracted since we've been listed in the last 8 years? Have you got the number...

Yes. So roughly 16, 17 because some obviously -- there's a couple more as well, but some actually closed, to various reasons. But around that number for both.

Yes. That's we've taken out and we've added. And to me it's you're looking for a manager to give you certain results. One of them, one of the newer managers that we put on in the last couple of years, Mark Holowesko -- I'm not sure if you're all aware of him. In Australia, you're probably not. And those that are younger might not be aware that he was John Templeton's right-hand man. John Templeton set up Templeton asset management, one of the -- probably in the U.S. one of the real pioneers in global investing and value investing. And yes, he -- like he's a great addition, but in terms of the managers, it's really trying to work out -- we try to broadly -- for the bulk of them, we try not to have less than 4% of the portfolio in a manager. And you've got to remember, when you invest in one of the managers, you get an incredibly diversified portfolio because they might own 40, 50, 80 stocks. And if we have 15 managers, then you could argue, are we too diversified? Well, in theory, we don't believe that's the case. And we do a lot of work, and you'll see in the annual report about what our active exposures are. And it's very enlightening, so we actually are giving you really good exposure to where we believe money can be made.

[ Brian ] has asked. You've had a few fund manager changes. I mean obviously you've spoken about one in terms of Holowesko. [ And we brought quant in ]. Do you have any plans to get some fund managers that manage the mega caps?

Yes. The -- I mean we're always looking for managers that make -- that add value, so the -- it doesn't matter where you add value. The -- and what we try to do is -- and you'll see in the annual report we try to give you a sort of an assessment of how the portfolio is structured. And the fact is you tend to find that broadly -- like fund managers per se tend to be not overweight, say, the top 5 companies in an index. It's just by default because they've already made it to the top 5. And so you're actually finding the ones that are going to become the top 5. That's what most fund managers do, so to me there's no conscious decision to just find a manager that focuses on, like, say, the top 10 or something like that. By default in terms of changing the managers, that may be the case, but as I said, with 30% of the managers -- or as 30% of the assets of the company trying to create more absolute performance, then they're not going to be exposed from a long-only perspective on the mega caps. So some of them, they may have some exposure to the large caps, but they may be short. They could be long half of them, own half of them. And they could be short the other half because what they're trying to deliver to us is not -- if the market is up 15%, with those absolute guys, we accept that they won't be up as much as the market, but when the market is down 10%, we still expect those guys to be up. So that's when you get -- that's the absolute performance versus relative performance, yes.

Excellent. Thank you very much, Geoff. I think we're coming up to time now, but it's sort of -- it comes down to me in terms of to thank everybody, to thank obviously, Geoff, our Founder, but also to thank our fund managers for their support, to listen to Qiao and to listen to Sarah from our not profit. But I mean, as Geoff said, we do have -- we've got 15 boutique fund managers who really have skin in the game. And I want to thank them really for their investment performance because obviously that drives dividends, capital growth. And that's really important to all of us, to deliver that and to give that money to the not-for-profits. So I thank them. I mean, all of you, as Geoff always says too, you own the company. And we do what we do because you allow us to do it. And so I want to thank you for your support. Any questions, always please ring me or e-mail in. And we will, of course, come back to you. As you know, we've actually split our webinars this year. And I know -- and thank you to some of you that have obviously been on the FGX yesterday and now on FGG today. I hope we've answered all of your questions. So please let us know if this format works for you, because we want to make sure that this is really what you need. So a survey is going to pop up. Please answer and let us know your feedback. And hopefully, we will see you in October, in our regional presentations when we go around Australia again, but thank you very much. Thank you very much for your time. Thanks, Geoff.

Thanks, guys.