Solaris Investment Management is launching a new listed investment company (LIC) worth up to $330 million, with a view of delivering investors a strong flow of fully franked dividends, paid out monthly.
The new vehicle will be known as Solaris Australian Equity Income Plus Ltd (ASX: SET) and will raise a minimum of $175 million and up to a maximum of $330 million in new shares priced at $2 each.
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Strong income stream targeted
Chair Neil Cochrane said in the prospectus for the offer that the company aimed to, "generate income, inclusive of franking credits, that exceeds the income of the S&P/ASX 200 Franking Credit Adjusted Daily Total Return Index annually''.
The company also aimed to generate total returns that were broadly in line with or exceeded the benchmark over the medium to long term, and to pay regular monthly fully franked dividends.
Mr Cochrane went on to say:
The portfolio will be managed by Solaris Investment Management Limited, utilising the same investment philosophy and income-focused approach that underpins the Solaris Australian Equity Income Fund, an unlisted fund that is in its tenth year of operation. The strategy is founded on proprietary fundamental research, disciplined and responsible portfolio construction and an emphasis on identifying sustainable income opportunities within the Australian equity market. The fundamental research includes a rigorous assessment of management; business model, balance sheet, environmental, social and governance, cash flow profile and trend in return on equity.
Mr Cochrane said that while past performance was no guarantee of future performance, "the unlisted Solaris Australian Equity Income Fund has delivered consistent returns ahead of the benchmark including +8.36% per annum income (+2.81% per annum ahead of benchmark) and, +10.89% per annum net total return (+0.10% ahead of benchmark) since inception''.
The aim is to pay regular dividends, however this would be reliant on the availability of profits, franking credits, and would depend on market conditions, he said.
Mr Cochrane said all of the company's directors and members of the investment team would take part in the offer.
Suited to income investors
The offer document says the investment strategy, "prioritises income generation, including franked dividends, which for investors on a marginal tax rate of 0-15% (and are entitled to tax refunds for excess franking credits) delivers a higher after-tax return per dollar compared to capital appreciation''.
This would put the investment squarely in the sights of retirees or those investing via their superannuation funds.
The broker firm offer of shares is expected to close on 1 April, with the shares to begin trading on 17 April.
