10 february 2016 december quarter 2015 listed investment ...€¦ · december quarter 2015 nathan...

Opinion Piece: Don’t forget about those options

In recent times, we have seen the resurgence of the Listed Investment Companies (LICs)

sector with a strong flow of new LICs listing on the ASX. In the last 2 years alone, $2.0bn has

been raised in the LIC initial public offerings (IPO). Nearly all the LICs that are listed on the

ASX, come with an attaching bonus option. These options tend to expire 18 to 24 months

after issue. A large number of these bonus options are due to expire in 2016 and in this

opinion piece, we discuss bonus options and what shareholders can do with these options.

(continued page 2).

Investment Highlights

As at the end of the Quarter, our key picks across pre-tax NTA and share price performance,

distribution yield (based on the previous 12 months and including Special Dividends) and

valuation were as follows. Please note that historical performance is no guarantee of future

performance.

Table 1: Quarter Highlights

It is important that clients are aware that the share price of a LIC is impacted by the oscillation

of the discount or premium to NTA, which should be taken into consideration when investing

in LICs. We therefore advise clients to view this report in conjunction with the Bell Potter

Weekly Indicative NTA. For further information please speak to your Bell Potter Adviser.

Inside this edition

� Opinion piece

� Market update

� Coverage of 42 securities

� New LICs - ALI, BTI, CBC, FGG & QVE

LISTED INVESTMENT COMPANIES.

10 February 2016

December Quarter 2015

Nathan Umapathy [email protected]

Bell Potter Securities Limited [email protected]

www.bellpotter.com.au

ABN 25 006 390 772

AFSL no. 243480

Pre-Tax NTA Performance (p.a.)

31-Dec-15 Large Lrg/Medium Med/Small Alternative Intl

(%) AFI AMH CTN FGX MFF

5 years 7.3 9.4 -1.1 n/a 24.5

7 years 10.4 13.1 7.7 n/a 18.2

10 years 6.5 8.0 4.9 n/a n/a

Share Price Performance (p.a.)


(%) AFI AMH CTN WMK MFF

5 years 8.2 12.3 2.1 n/a 25.8

7 years 10.6 14.5 13.4 n/a 21.2

10 years 7.6 10.5 6.8 n/a n/a

Distribution


(%) AFI AMH CTN ALF HHV

Net Yield 3.9 4.5 8.1 7.2 10.2

Franking 100.0 100.0 50.0 100.0 6.0

Gross Yield 5.5 6.4 9.8 10.2 10.4

Valuation


(%) AFI AMH CTN FGX GVF

Current Disc/Prem 5.7 -3.8 -16.5 -2.5 -11.2

3 year avg 3.8 -4.0 -10.0 n/a n/a

5 year avg 0.7 -9.7 -15.0 n/a n/a

10 year avg 1.3 -13.9 -20.7 n/a n/a

SOURCE: COMPANY DATA, IRESS & BELL POTTER

ABRIDGED

Index

Opinion Piece 2

Market Update 6

Summary

Universe Summary 9

Investment Performance 10

Historical Gross Dividend Yield 11

Premium/Discount to NTA 12

Weekly Indicative NTA 17

Liquidity 20

Indirect Cost Ratio 21

Appendix A: Glossary of terms 22

Appendix B: Disclosures 24

LISTED INVESTMENT COMPANIES. 2

Opinion Piece: Don’t forget about those options

In recent times, we have seen the resurgence of the Listed Investment Companies (LICs) sector

with a strong flow of new LICs listing on the ASX. In the last 2 years alone, $2.0bn has been raised

via LIC initial public offerings (IPO).

We believe this growing demand stems from investors increasing interest in listed managed

product. LICs are professional managed investment portfolios that offer immediate diversification

and access to top quality fund managers, while also being transparent and liquid. At the same time,

LICs are also strongly supported by brokers and increasingly used by financial planners post FoFA,

as LICs offer varying exposures that compliment an existing portfolio of listed assets and can

materially enhance risk adjusted outcomes for clients.

Nearly all the LICs that are listed on the ASX, come with an attaching bonus option. These options

tend to expire 18 to 24 months after issue. A large number of these bonus options are due to expire

in 2016 and in this opinion piece, we discuss bonus options and what shareholders can do with

these options.

What is a LIC Bonus Option?

A bonus option issued by a LIC is offered to security holders that participate in an IPO. The option

holder is able to purchase additional shares of the underlying security at a fixed price (strike price)

until a specified date (expiry date). The bonus option is usually listed and can be sold on the ASX.

This allows the holder of the bonus option to monetise the option value by selling the option on

market if they do no want to exercise the option (buy more of the security) themselves.

Bonus Option compensate for Initial NTA reduction

Similar to managed funds and all investment products there is a cost of participating in an

investment in the form of a transaction fee. In a LIC this fee is embedded in the Net Tangible Asset

(NTA). Generally this fee is 2-3% and covers all the transactional costs including the cost of advice,

and for a $1.00 IPO this will see an opening NTA of $0.97-$0.98.

Options were introduced to provide an incentive for investors to participate in the IPO and place

them at a significant advantage to those who purchase these securities in the secondary market.

These options are usually listed on the ASX and are priced in the market using a formula called

Black-Scholes. However, they trade on market and are exposed to the vagaries of supply and

demand which usually sees them trade between $0.04 to $0.05 on day 1.

Table 2: LIC Initial Public Offering—2015

*Options will be listed 6 months after shares quoted on ASX.


Wealth Defenders Equity (WDE/WDEO) May-15 1.000$ 0.976$ 1 Option for 1 Share 0.010$ 1.000$ Nov-16

Argo Global Listed Infrastructure (ALI/ALIO) Jul-15 2.000$ 1.965$ 1 Option for 1 Share 0.027$ 2.000$ Mar-17

Contango Income Generator (CIE/CIEO) Aug-15 1.000$ 0.986$ 1 Option for 2 Shares 0.050$ 1.000$ Mar-18

Glennon Small Companies (GC1/GC1O) Aug-15 1.000$ 0.971$ 1 Option for 1 Share 0.040$ 1.000$ Aug-16

Future Gen Global Investment Comp (FGG/FGGO) Sep-15 1.100$ 1.087$ 1 Option for 1 Share 0.050$ 1.100$ Sep-17

Ellerston Asian Investments (EAI/EAIO) Sep-15 1.000$ 0.972$ 1 Option for 2 Shares n/a* 1.000$ Feb-19

Platinum Asia Investments (PAI/ PAIO) Sep-15 1.000$ 0.985$ 1 Option for 1 Share 0.048$ 1.000$ May-17

Absolute Equity Performance Fund (AEG/AEGO) Dec-15 1.100$ 1.075$ 1 Option for 1 Share n/a* 1.100$ Nov-17

8Ip Emerging Companies (8EC/8ECO) Dec-15 1.000$ 0.979$ 1 Option for 2 Shares 0.040$ 1.000$ Dec-16

Listing

Price

Exercise

PriceExpiryName (ASX/Option Code)

Listing

Date

Issue

PriceInitial NTA Option Ratio Bonus


Opinion Piece (cont.)

As an example, lets assume the options are priced at $0.04 and the NTA is $0.98 on day 1 of its

listing. If the share price trades at the asset backing of $0.98 and the option trades at $0.04, the

investors effective traded value is $1.02. This option will likely trade at a higher value if the share

price increases, and those that own the options can potentially exercise that right and buy into the

security at $1.00. However, those that participate in the secondary market will not pick up the

option unless they buy it separately, and their returns may be impacted by the dilution associated

with the options exercise.

What to consider when you hold a LIC Bonus Option

Investors holding options have 3 choices to consider: exercise the option, sell the option or do

nothing.

Table 3: What Investor can do with Options

Don’t let options lapse

Whether or not an option holder decides to exercise or sell an option, largely depends on the

investors individual circumstances. However, an option holder should only exercise an option if it is

‘in the money’ i.e. the share price is higher than the exercise price. We would advise investors that

have no intention of exercising to sell these options on market to unlock some value. Holders that

‘do nothing’ will not be compensated for any dilution that occurs as other investors exercise their

options.

The value of these options will vary depending on the underlying share price. However, it is worth

noting that as the options reach expiry they generally tend to drop in value. The reasoning is that if

they are ‘in the money’ some investors may be tempted to ‘sell the share’ and ‘buy the option’, if the

option price plus the exercise price is lower than the current share price. This has a tendency to

drive down the share price as the expiry date approaches, and this in-turn reduce the value of the

option. On the positive side, it can also make for good buying if it does push an LIC into a deeper

than ordinary discount.

Exercise the option Sell the option Do nothing

• An option entitles the holder to one share in the

underlying security at the exercise price.

• Once exercised, the option will convert to fully paid

ordinary share and rank equally with existing share.

• Options should only be exercised when the share

price trades at a higher price than the exercise price,

otherwise it would be cheaper to purchase the share

on the ASX.

• As most bonus options are listed on the ASX, they

can be bought and sold on market.

• Options holders that are not interested in buying

more securities in the underlying security can sell

their options on market to compensate them for the

dilution associated with option holders that do

exercise their right.

• Options holders that do not exercise their right to

buy more shares or sell the option on market will

expire on the expiry date.

• As the holder of an option, there is no obligation to

exercise or sell the option on market, however, the

option will expire worthless and the investors return

will not be compensated for the dilution associated

with any options that are exercised.



Bonus Options expiring in the next 6 months

The table below lists LIC Options that will expire within the next 6 months. We have also calculated

the current fully diluted discount, and the average fully diluted discount post listing.

Table 4: Outstanding options expiring within the next 6 months

Table 5: Effective impact to share price if premium or discount normalize

QVE and GVF are both trading above the exercise price which suggests that there is value in the

option. QVE has an average fully diluted premium to NTA of 1.20% compared to the 2.88%

discount presently, suggesting reasonable value. This is replicated with GVF also indicating value

with the current discount at 7.80% compared with the average discount at 2.44%. If the discount

were to normalise this would suggest a 5.36% investment return alone.

BTI, PAF and PIC share prices are all trading below their $1.00 exercise price suggesting that there

is no value in exercising the option presently, and that you may be better off selling the option

(admittedly at a limited value) and potentially buying on market. It is interesting to note that all 3

appear to offer value presently, suggesting good buying at these levels.


Data as at close of business 29 Jan 2016.

QV Equities QVE $1.01 QVEO $1.00 165,804,081 15-Mar-16

Global Value Fund GVF $1.01 GVFO $1.00 50,623,734 17-Mar-16

Bailador Technology Investment BTI $0.96 BTIO $1.00 58,336,509 31-Mar-16

PM Capital Asian Fund PAF $0.87 PAFO $1.00 55,087,500 31-May-16

Perpetual Equity Investment Comp PIC $0.95 PICO $1.00 249,712,777 10-Jun-16

Options

Code

Exercise

Price

Outstanding

OptionsExpiry

ASX

Code

Stock

Price

QV Equities QVE $1.01 $1.04 -2.88% 1.20% 4.08%

Global Value Fund GVF $1.01 $1.09 -7.80% -2.44% 5.36%

Bailador Technology Investment BTI $0.96 $1.13 -15.04% -18.90% -3.86%

PM Capital Asian Fund PAF $0.87 $1.02 -15.20% -10.40% 4.80%

Perpetual Equity Investment Comp PIC $0.95 $1.01 -5.94% -3.30% 2.64%

Investment return if

Premium/Discount

normalise

Fully Diluted

Indicative

Pre Tax NTA

Indicative

Premium/

Discount

Ave Premium/

Discount since

Incept.

ASX

Code

Stock

Price


Data as at close of business 29 Jan 2016.



Strong investment performance from GVF, BTI, PIC and QVE

It is also worth considering the NTA investment performance of these LICs. Most notably GVF, BTI,

PIC and QVE have delivered solid NTA growth (options dilution removed), outperforming their

respective benchmarks 8.6%, 6.4%, 6.0% and 2.1% since inception. This strong investment

performance should give these managers a competitive angle to market the LIC to investors.

Further the absence of options is also likely to enhance each LICs trading in the secondary market

given no upside dilution which does tend to weigh on the share price. In conjunction with a credible

communications strategy we suspect this LICs may be able to generate more demand for the stock

and arguably drive share price appreciation.

Table 6: Pre-Tax NTA Performance

3-mth 6-mth 1 Year Incept. 3-mth 6-mth 1 Year Incept.

Domestic Equity

QVE QV Equities Large/Medium 6.3 3.9 9.0 9.4 S&P/ASX 300 Ex 20 Accum -1.4 -0.9 -1.4 2.1

PIC Perpetual Equity Investment Comp Large/Medium 6.4 6.7 8.8 8.8 S&P/ASX 300 Accum -0.1 7.1 6.0 6.0

BTI Bailador Technology Investment Unlisted Tech 14.6 15.5 14.4 14.4 8.00% p.a 12.7 11.6 6.4 6.4

International Equity

GVF Global Value Fund Global -0.2 1.2 12.2 15.0 BBSW 1 Year Rate + 4% -1.7 -1.9 6.0 8.6

PAF PM Capital Asian Fund Asia 6.0 -2.6 2.8 6.9 MSCI Asia (Ex-Jpn) Accum 6.1 6.3 1.1 -3.4

Value Add + (%)ASX Code

ASX Listed

Investment Companies

Investment

Mandate

Pre-tax NTA Peformance (%)Benchmark


Data as at 31 Dec 2015.


Market Update

Initial Public Offering

After a stellar 2014, the LIC sector followed that up with another strong year in 2015 with 9 new LICs coming to market and

raising over $1.4bn. The largest LIC to list in 2015 was Future Generation Global Investment Company (ASX: FGG), which

secured $302.1m, followed by Platinum Asia Investments (ASX:PAI) and Argo Global Listed Infrastructure (ASX:ALI) both

raising just under $300m.

Once again International LICs drove the bulk of the money raised within this sector. Out of the 9 new LICs, 4 LICs offered

direct exposure to international equities. The prospect of gaining more offshore exposure and potential depreciation of the

Australian dollar could lead to more LICs with international mandates. Especially as we still see a demand for these products

from managers with propelling investment strategies and a proven track record.

Table 7: IPOs for 2015 Graph 1: Money raised from LIC IPOs - ‘03 to ‘15

Capital Raising

A total of $1.2bn was raised in the secondary markets through a range of Dividend Reinvestment Plans (DRPs),

Placements, Rights Issues, and Entitlement Offerings. Australian Foundation Investment Company (ASX: AFI) was the

largest player raising $154m through a Share Purchase Plan and $51m from DRPs. However, MFF also came to market

with sizeable raisings of ~ $130m.

Table 8: CY15 Dividend Reinvestment Plans


Listed Shares Issued Price Raised

WDE May-15 125,699,581 1.00$ 125,699,581$

ALI Jul-15 143,063,314 2.00$ 286,126,628$

GC1 Apr-15 21,687,114 1.00$ 21,687,114$

CIE Aug-15 71,451,002 1.00$ 71,451,002$

FGG Sep-15 274,672,167 1.10$ 302,139,384$

EAI Sep-15 120,000,001 1.00$ 120,000,001$

PAI Sep-15 292,869,649 1.00$ 292,869,649$

AEG Dec-15 90,909,090 1.10$ 99,999,999$

8EC Dec-15 33,067,013 1.00$ 33,067,013$

1,353,040,371$ 0

300

600

900

1200

1500

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

$(m)

Shares Issued Raised

ABW 81,362 79,321$

AFI 8,631,441 51,844,830$

AGF 8,798,021 9,929,447$

AIB 68,628 58,157$

ALF 13,768,793 18,240,577$

ALR 85,493 97,259$

AMH 4,133,137 3,513,166$

AQF 426,766 749,638$

ARG 4,723,217 37,300,556$

AUI 282,298 2,297,757$

AUP 7,784 42,456$

AYF 22,114 138,933$

BEL 645,290 89,136$

BKI 3,472,567 5,987,616$

CAM 830,833 750,070$

CBC 48,998 47,871$

CDM 4,757,660 6,638,887$

COT 7,500,000 600,000$

CTN 2,269,913 2,195,817$

Shares Issued Raised

DUI 1,107,869 3,820,554$

EGI 55,495 57,160$

EMF 633,072 1,107,876$

FGX 236,065 251,386$

FSI 242,686 398,473$

HHV 1,955,263 2,184,600$

MFF 789,941 1,431,585$

MIR 1,827,620 4,454,835$

MLT 1,711,152 7,633,044$

PIC 77,096 71,699$

PMC 2,380,958 4,231,225$

SNC 211,743 186,334$

TGG 925,484 1,165,277$

TOP 698,933 321,509$

WAA 215,968 208,409$

WAM 20,791,814 39,878,900$

WAX 8,865,079 10,497,959$

WHF 797,439 3,388,624$

221,890,943$



Market Update

Table 9: CY15 Share Purchase Plans, Placements & Entitlements

Options

Options continue to be a fantastic source of capital for LICs in 2015. A total of $372m was gain through the exercise of

options in what was a volatile year for investors. Nearly half the funds raised were driven by PM Capital Global Opp Fund

(ASX:PGF) who managed to get all its listed options exercised (some via a shortfall placement after its options expired),

essentially doubling the size of the fund. Unfortunately, fair chunk of options were not exercised before exipiry as many of

these stocks traded below its exercise price.

Table 10: CY15 Lapsed Options



Method Shares Issued Price Raised

AFI SPP 27,839,301 5.51$ 153,394,549$

AFI Conversion 2,047,700 5.09$ 10,415,421$

ARG SPP 7,787,690 7.75$ 60,354,598$

AUI Entitlement 13,692,944 6.50$ 89,004,136$

BAF Entitlement 7,691,243 1.00$ 7,691,243$

BAF Shortfall 12,440,691 1.00$ 12,440,691$

CDM Placement 12,793,415 1.43$ 18,294,583$

CYA Entitlement 13,644,284 0.85$ 11,543,064$

FSI SPP 717,154 1.51$ 1,082,903$

GVF Placements 6,881,512 1.11$ 7,638,478$

HHV Placements 28,300,000 1.26$ 35,658,000$

MFF Entitlement 79,778,586 1.60$ 127,645,738$

MIR SPP 11,867,227 2.20$ 26,107,899$

MLT SPP 7,746,892 4.18$ 32,382,009$

SNC SPP 3,629,251 0.88$ 3,193,741$

SNC Placement 4,204,164 0.88$ 3,699,664$

TGG Entitlement 49,747,731 1.30$ 64,672,050$

TGG Entitlement 49,747,731 1.30$ 64,672,050$

WAM SPP 54,369,870 1.90$ 103,302,753$

WAM Placements 47,440,000 1.90$ 90,136,000$

WHF SPP 2,943,611 4.64$ 13,658,355$

936,987,925$

NCCO 1.00$ 1,384,311 1,384,311$ 01-Feb-15

WAXO 1.20$ 45,367,797 54,441,356$ 17-Jun-15

SNCO 1.00$ 33,922,644 33,922,644$ 24-Jul-15

NCCOA 1.13$ 11,789,026 13,321,599$ 01-Aug-15

CDMO 1.43$ 81,007,591 115,840,855$ 31-Aug-15

WICO 1.30$ 12,119,213 15,754,977$ 31-Aug-15

OZGO 0.23$ 34,476,161 7,929,517$ 31-Aug-15

CAMO 1.04$ 80,727,919 83,957,036$ 20-Oct-15

BAFO 0.98$ 13,177,310 12,949,343$ 16-Dec-15

339,501,638$

Exercise Price Not ExercisedPotential Capital

LostExpiry


Market Update

Table 11: CY15 Options Exercised

Table 12 highlights the potential capital to be raised from the remaining outstanding LIC options. Twelve out of the eighteen

LICs will be expiring in 2016, however, majority of these options (ASX: 8EC, BTI, BST, CBC, PAF, PIC, WDE) are trading

below the exercise price. This would suggest that only a fraction of these options will be exercised within this period.

Table 12: Outstanding Options



NCCO 1.00$ 9,968,027 9,968,027$ 01-Feb-15

WAXO 1.20$ 20,511,372 24,613,646$ 17-Jun-15

PGFO 1.00$ 173,181,200 173,181,200$ 30-Jun-15

SNCO 1.00$ 1,076,356 1,076,356$ 24-Jul-15

CDMO 1.43$ 50,922,186 72,818,726$ 31-Aug-15

CAMO 1.04$ 898 934$ 20-Oct-15

BAFO 0.98$ 39,795,493 39,107,317$ 16-Dec-15

QVEO 1.00$ 18,334,491 18,334,491$ 15-Mar-16

GVFO 1.00$ 11,083,878 11,083,878$ 17-Mar-16

PICO 1.00$ 667,500 667,500$ 10-Jun-16

OZGO 0.18$ 5,790 1,143$ 31-Aug-16

WICOA 1.30$ 275 326$ 31-Aug-16

FGXO 1.10$ 2,152,877 2,368,165$ 16-Sep-16

CBCO 1.00$ 25,100 25,100$ 30-Sep-16

NACO 1.00$ 7,500 7,500$ 30-Nov-16

ALIO 2.00$ 19,000 38,000$ 31-Mar-17

PAIO 1.00$ 241,600 241,600$ 15-May-17

FGGO 1.10$ 507,000 557,700$ 15-Sep-17

MFFO 1.00$ 17,315,096 17,825,885$ 31-Oct-17

EGIO 1.00$ 529,000 529,000$ 10-Apr-18

372,446,494$

Exercise Price Exercised Raised Expiry

QVEO 1.04$ 1.00$ 166,278,909 166,278,909$ 15-Mar-16

GVFO 1.02$ 1.00$ 50,740,734 50,740,734$ 17-Mar-16

BTIO 1.00$ 1.00$ 58,336,509 58,336,509$ 31-Mar-16

PAFO 0.96$ 1.00$ 55,087,500 55,087,500$ 31-May-16

PICO 0.98$ 1.00$ 249,726,777 249,726,777$ 10-Jun-16

BSTO 1.00$ 1.00$ 16,022,500 16,022,500$ 17-Aug-16

GC1O 1.01$ 1.00$ 21,687,113 21,687,113$ 18-Aug-16

FGXO 1.16$ 1.10$ 179,482,847 197,431,132$ 16-Sep-16

CBCO 0.95$ 1.00$ 24,214,499 24,214,499$ 30-Sep-16

WDEO 0.82$ 1.00$ 115,904,462 115,904,462$ 23-Nov-16

NACO 1.01$ 1.00$ 21,492,500 21,492,500$ 30-Nov-16

8ECO 0.97$ 1.00$ 16,528,506 16,528,506$ 12-Dec-16

ALIO 1.75$ 2.00$ 143,044,214 286,088,428$ 31-Mar-17

PAIO 1.03$ 1.00$ 292,628,046 292,628,046$ 15-May-17

FGGO 1.17$ 1.10$ 274,165,166 301,581,683$ 15-Sep-17

MFFO 2.10$ 0.9964$ 78,240,077 77,958,413$ 31-Oct-17

CIEO 0.99$ 1.00$ 50,000,000 50,000,000$ 30-Mar-18

EGIO 1.05$ 1.00$ 33,599,177 33,599,177$ 10-Apr-18

2,035,306,887$

Stock Price Exercise PriceOutstanding

OptionsPotentially Raise Expiry


*12 month historical dividends including Special Dividends. *ICR with performance fee. “HHY distributed a return of capital in the last 12 months. CTN has purchased the rights of CAML(which is an assets manager) - as such the ICR is not reflective of the underlying vehicle

We note we have included 5 new LICs into our coverage - 3 with domestic mandates (BTI, CBC and QVE) and 2 with international

exposure (ALI and FGG). On a Weighted Average basis, the LICs within the Bell Potter universe are trading at an average

premium to pre-tax NTA of 4.0% as at 31 Dec 2015, a slight fall from the previous quarter. We saw the Weighted Average

premium of Domestic LICs contract from the prior quarter, 6.4% to 5.0% premium. International LICs also saw its discount

contract from the previous quarter– going from a 8.1% discount to 3.6% discount.

Table 13: Current Share Price Premium/Discount to NTA and Yield

�

Universe Summary


ASX Code Company name Investment Mandate

Market

Cap

($m)

Price

($)

Pre-tax

NTA

($)

Prem/

(Disc) to

pre-tax

NTA (%)

Post-tax

NTA ($)

Prem/

(Disc) to

post-tax

NTA (%)

12 Mth

Dividend

Per Share

($)*

Net

Dividend

Yield

(%)*

Franking

(%)

Gross

Dividend

Yield

(%)*

Indirect

Cost

Ratio

(%)

Domestic Equity

AFI AFIC Large 6,529 5.95 5.63 5.7 4.87 22.2 0.230 3.9 100 5.5 0.16

ARG Argo Investments Large 5,416 8.00 7.28 9.9 6.47 23.6 0.295 3.7 100 5.3 0.15

DJW Djerriw arrh Investments Large 940 4.30 3.21 34.0 3.27 31.5 0.260 6.0 100 8.6 0.45

AUI Australian United Large 811 7.40 7.83 -5.5 6.93 6.8 0.340 4.6 100 6.6 0.10

CYA Century Australia Large 68 0.83 0.90 -8.0 0.93 -11.4 0.033 3.9 100 5.6 1.15

MLT Milton Corporation Large/Medium 2,972 4.58 4.50 1.8 3.98 15.1 0.188 4.1 100 5.9 0.12

BKI BKI Investment Large/Medium 958 1.69 1.61 4.7 1.51 11.6 0.072 4.3 100 6.1 0.18

CIN Carlton Investments Large/Medium 898 33.91 38.66 -12.3 31.54 7.5 1.080 3.2 100 4.5 0.09

DUI Diversif ied United Large/Medium 706 3.41 3.59 -5.0 3.18 7.2 0.140 4.1 100 5.9 0.14

WHF Whitefield Large/Medium 348 4.34 4.79 -9.4 4.39 -1.1 0.170 3.9 100 5.6 0.38

AMH AMCIL Large/Medium 220 0.90 0.93 -3.8 0.86 4.1 0.040 4.5 100 6.4 0.65

QVE QV Equities Large/Medium 210 1.04 1.08 -3.8 1.05 -1.5 0.020 1.9 100 2.8 1.04

CAM Clime Capital Large/Medium 71 0.88 0.94 -6.9 0.94 -6.9 0.047 5.4 100 7.7 1.79

FSI Flagship Investments Large/Medium 36 1.43 1.86 -23.2 1.75 -18.3 0.073 5.1 100 7.3 1.43

CBC CBG Capital Large/Medium 23 0.95 1.06 -10.2 1.03 -7.4 0.015 1.6 100 2.3 1.36

WAM WAM Capital Medium/Small 992 2.12 1.97 7.7 1.88 12.8 0.140 6.6 100 9.4 2.67

MIR Mirrabooka Medium/Small 369 2.58 2.43 6.2 2.18 18.3 0.170 6.6 100 9.4 0.66

WIC WestOz Investment Co. Medium/Small 110 0.85 0.96 -11.1 1.01 -15.8 0.090 10.6 100 15.1 1.31

WAX WAM Research Medium/Small 223 1.29 1.20 7.3 1.20 7.4 0.080 6.2 100 8.9 4.31

OZG Ozgrow th Medium/Small 43 0.12 0.15 -19.5 0.16 -24.1 0.015 12.5 100 17.9 1.51

CTN Contango Microcap Small/Micro 153 0.95 1.14 -16.5 1.08 -11.9 0.077 8.1 50 9.8 +n/a

ACQ Acorn Capital Small/Micro 42 0.85 1.02 -16.3 0.99 -14.0 0.000 0.0 0 0.0 1.78

BTI Bailador Tech Investments Unlisted Tech 62 1.00 1.25 -20.4 1.13 -11.8 0.000 0.0 0 0.0 3.49

ALF Australian Leaders Fund Long/Short 375 1.40 1.36 2.6 1.37 1.8 0.100 7.2 100 10.2 1.25

CDM Cadence Capital Long/Short 412 1.54 1.34 14.4 1.37 12.0 0.110 7.2 100 10.2 2.20

WAA WAM Active Long/Short 37 1.07 1.05 2.0 1.05 2.1 0.025 2.3 100 3.3 2.70

NCC Naos Emerging OpportunitiesLong/Short 46 0.98 1.12 -12.9 1.09 -10.6 0.063 6.4 100 9.2 2.58

WMK Watermark Market Neutral Market Neutral 85 0.98 1.08 -9.7 1.07 -8.9 0.045 4.6 59 3.9 1.82

0.0 0.01 0.0 0.0 0.01

MFF Magellan Flagship Fund Global 975 2.10 2.10 -0.1 1.82 15.6 0.020 1.0 50 1.1 1.61

PMC Platinum Capital Global 446 1.90 1.58 20.3 1.55 22.6 0.110 5.8 100 8.3 1.94

TGG Templeton Global Grow th Global 307 1.23 1.39 -11.8 1.35 -9.1 0.041 3.3 17 3.6 1.14

HHV Hunter Hall Global Value Global 286 1.18 1.34 -12.2 1.28 -7.6 0.120 10.2 6 10.4 1.90

PGF PM Capital Global Opp Global 351 1.01 1.13 -10.7 1.11 -8.9 0.000 0.0 n/a 0.0 1.52

GVF Global Value Fund Global (Multi Assets) 74 1.02 1.15 -11.2 1.11 -7.8 0.020 2.0 100 2.8 4.81

ALI Argo Global Infrastructure Global (Listed Infra) 250 1.75 1.87 -6.4 1.89 -7.4 0.000 0.0 n/a 0.0 n/a

PAF PM Capital Asian Opp Asia 53 0.96 1.07 -10.6 1.09 -12.0 0.000 0.0 n/a 0.0 2.09

AGF AMP Capital China Grow th China 429 1.11 1.31 -15.3 1.31 -15.3 0.339 30.5 0 30.5 1.97

0.0 0.01 0.0 0.0

HHY Hastings High Yield Fixed income 10 0.10 0.12 -18.8 0.12 -18.8 0.000 n/a" 0 n/a" 2.77

ABW Aurora Absolute Income 16 0.95 0.95 -0.3 0.95 -0.3 0.044 4.7 0 4.7 1.07

FGX Future Gen Invest Co Fund of Funds 217 1.16 1.19 -2.5 1.18 -1.3 0.020 1.7 100 2.5 0.16

FGG Future Gen Global Invest Gbl Funds of Funds 322 1.17 1.07 9.5 1.07 8.9 0.000 0.0 n/a 0.0 n/a

SNC Sandon Capital Activist 38 0.85 0.98 -13.2 0.97 -12.2 0.050 5.9 100 8.4 2.60

Arithmetic Average (All) -4.3 -0.3 4.8 6.3 1.59

Weighted Average (All) 4.0 15.0 4.5 6.1 0.59

Weighted Average (Domestic Market Cap - Over $500m) 6.0 19.2 4.1 5.9 0.28

Weighted Average (Domestic Market Cap - Under $500m) -1.5 1.5 5.8 8.1 1.76

Weighted Average (Domestic All) 5.0 17.0 4.3 6.1 0.46

Weighted Average (International Equity) -3.6 2.4 6.5 7.0 1.63

Weighted Average (Specialist) 7.3 7.9 2.5 3.4 0.55


Specialist


In the Table below, we have evaluated our LICs using the performance of both the pre-tax NTA and share price. The pre-tax NTA

data seeks to measure the performance of the underlying investments of the Fund. Whereas, the share price data measures the

performance of the security as it trades on the ASX. However, some of this terminology is a little misleading as the pre-tax NTA

actually reflects tax associated with realised capital gains (tax applicable on positions that have been exited) but not unrealised

capital gains (tax applicable on positions that have not been exited).

The measurement of a LIC’s performance is calculated after all operating expenses, provision and payment of both income and

realised capital gains tax and the reinvestment of dividends, but does not incorporate franking. LIC returns will consequently be

understated relative to the Index return given that the Benchmarks do not factor in operating costs or taxation. The performance of

Unlisted Unit Trusts are not measured on an after tax basis and are therefore, generally, not a valid comparison.

Table 14: Pre-tax NTA and Share Price Performance

Investment Performance

CDM: In May 2011 CDM received $0.22 per CDM share of franking credits when RHG returned the majority of its assets in the form of a fully franked dividend. At the time, CDM shares were trading at $1.25. These franking credits were worth 17.6% of the CDM share price at the time and are not reflected in our performance calculations as the calculations are based on pre-tax NTA and not post-tax NTA.


Yr 1 Yr 3 Yr 5 Yr 7 Yr 10 Yr 1 Yr 3 Yr 5 Yr 7 Yr 10 Yr 1 Yr 3 Yr 5 Yr 7 Yr 10 Yr 1 Yr 3 Yr 5 Yr 7 Yr 10

Domestic Equity

AFI AFIC AFI 1.0 8.7 7.3 10.4 6.5 -1.6 -0.5 0.3 0.4 0.9 2.1 9.7 8.2 10.6 7.6 -1.7 0.4 1.7 0.4 1.9

ARG Argo Investments ARG 2.8 9.3 7.3 10.2 5.6 0.2 0.1 0.3 0.2 0.0 7.0 13.3 9.2 10.5 6.4 3.2 4.0 2.7 0.3 0.7

DJW Djerriw arrh Investments DJW -2.6 5.0 4.7 8.0 4.6 -5.2 -4.2 -2.3 -2.0 -1.0 -1.2 7.8 6.8 9.5 6.7 -5.0 -1.5 0.3 -0.7 1.0

AUI Australian United AUI -2.2 7.7 5.6 9.7 5.1 -5.0 -1.3 -1.1 -0.2 -0.4 -1.9 8.9 6.6 9.6 5.6 -5.7 -0.4 0.1 -0.6 -0.1

CYA Century Australia CYA 1.2 7.5 3.8 6.8 3.2 -1.6 -1.5 -2.9 -3.1 -2.3 -2.6 9.7 5.2 10.0 4.1 -6.4 0.4 -1.3 -0.2 -1.6

MLT Milton Corporation MLT 9.5 11.4 9.5 11.4 6.5 5.7 2.1 3.0 1.2 0.8 6.5 13.6 11.7 11.8 6.3 2.7 4.3 5.2 1.6 0.6

BKI BKI Investment BKI 3.1 8.3 7.4 10.3 6.1 0.3 -0.7 0.7 0.4 0.6 10.9 11.9 11.4 14.0 8.1 7.1 2.6 4.9 3.8 2.4

CIN Carlton Investments CIN 24.7 22.2 16.0 17.1 11.3 22.1 13.0 9.0 7.1 5.7 24.2 24.3 18.3 17.8 11.6 20.4 15.0 11.8 7.6 5.9

DUI Diversif ied United DUI 1.3 9.9 7.2 10.2 5.7 -1.5 0.9 0.5 0.3 0.2 4.4 11.6 8.5 10.1 7.0 0.6 2.3 2.0 -0.1 1.3

WHF Whitef ield WHF 8.8 16.5 12.8 12.8 5.8 0.7 1.3 -0.7 -0.9 -1.5 6.6 16.7 13.9 12.8 6.6 -1.5 1.5 0.4 -0.9 -0.7

AMH AMCIL AMH 12.2 10.9 9.4 13.1 8.0 9.6 1.7 2.4 3.1 2.4 6.0 11.0 12.3 14.5 10.5 2.2 1.7 5.8 4.3 4.8

QVE QV Equities QVE 9.0 n/a n/a n/a n/a -1.4 n/a 2.4 3.1 n/a 1.4 n/a n/a n/a n/a -1.4 n/a n/a n/a n/a

CAM Clime Capital CAM 0.6 -0.7 1.2 7.9 5.6 -3.2 -10.0 -5.3 -2.3 -0.1 -4.1 0.2 6.2 11.1 6.4 -7.9 -9.1 -0.3 0.9 0.7

FSI Flagship Investments FSI 12.0 13.7 9.7 11.2 6.3 8.2 4.4 3.2 1.0 0.6 -0.1 9.6 6.0 8.3 5.6 -3.9 0.3 -0.5 -1.9 -0.1

CBC CBG Capital CBC 8.7 n/a n/a n/a n/a 6.1 n/a n/a n/a n/a -0.9 n/a n/a n/a n/a -4.7 n/a n/a n/a n/a

WAM WAM Capital WAM 18.2 11.7 10.2 13.5 10.3 14.4 2.4 3.7 3.3 4.6 13.2 15.8 15.6 21.9 12.2 9.4 6.5 9.1 11.7 6.5

MIR Mirrabooka MIR 17.7 14.8 11.9 14.1 8.8 6.9 6.8 9.7 5.6 5.7 7.8 13.4 14.5 16.4 10.3 4.0 4.1 8.0 6.2 4.6

WIC WestOz Investment Co. WIC 2.0 -6.0 -4.2 -1.6 n/a -8.2 -7.7 -1.7 -8.2 n/a -11.7 0.3 2.5 2.8 n/a -15.5 -9.0 -4.0 -7.4 n/a

WAX WAM Research WAX 17.6 15.2 12.5 12.2 6.9 13.8 5.9 6.0 2.0 1.2 18.7 19.8 20.8 22.3 10.7 14.9 10.5 14.3 12.1 5.0

OZG Ozgrow th OZG -6.1 -8.1 -4.4 5.5 n/a -16.3 -9.8 -10.9 -1.1 n/a -26.3 -4.9 1.0 10.4 n/a -30.1 -14.2 -5.5 0.2 n/a

CTN Contango Microcap CTN 11.2 6.1 -1.1 7.7 4.9 1.0 4.4 1.4 1.1 3.5 -1.8 6.3 2.1 13.4 6.8 -5.6 -3.0 -4.4 3.2 1.1

ACQ Acorn Capital ACQ 16.8 n/a n/a n/a n/a 6.6 n/a n/a n/a n/a 16.4 n/a n/a n/a n/a 6.2 n/a n/a n/a n/a

BTI Bailador Tech Investments BTI 14.4 n/a n/a n/a n/a 6.4 n/a n/a n/a n/a 17.1 n/a n/a n/a n/a 13.3 n/a n/a n/a n/a

ALF Australian Leaders Fund ALF 13.6 9.5 8.9 15.2 10.3 9.8 0.2 2.4 5.0 4.6 5.5 10.8 14.1 22.3 13.7 1.7 1.5 7.6 12.1 8.0

CDM Cadence Capital CDM 7.5 8.7 9.8 16.8 n/a 3.7 -0.6 3.3 6.6 n/a 16.4 10.8 20.5 22.0 n/a 12.6 1.5 14.0 11.8 n/a

WAA WAM Active WAA 9.6 6.4 5.2 9.1 n/a 5.8 -2.9 -1.3 -1.1 n/a 0.5 5.8 8.9 13.3 n/a -3.3 -3.5 2.4 3.1 n/a

NCC Naos Emerging Opportunities NCC 1.3 n/a n/a n/a n/a -8.9 n/a n/a n/a n/a -0.4 n/a n/a n/a n/a -4.2 n/a n/a n/a n/a

WMK Watermark Market Neutral WMK 18.8 n/a n/a n/a n/a 16.7 n/a n/a n/a n/a 15.1 n/a n/a n/a n/a 11.3 n/a n/a n/a n/a


MFF Magellan Flagship Fund MFF 13.3 31.8 24.5 18.2 n/a 4.4 10.9 11.7 9.9 n/a 16.8 32.8 25.8 21.2 n/a 7.9 11.9 13.0 12.9 n/a

PMC Platinum Capital PMC 2.3 15.8 9.5 9.1 4.9 -7.1 -5.4 -4.0 -1.1 0.1 10.7 27.7 9.9 12.3 4.5 1.3 6.5 -3.6 2.1 -0.3

TGG Templeton Global Grow th TGG 3.3 17.4 12.2 7.5 2.8 -6.1 -3.8 -1.3 -2.7 -2.0 -9.5 20.3 12.1 9.2 6.8 -18.9 -0.9 -1.4 -1.0 -0.1

HHV Hunter Hall Global Value HHV 8.4 18.5 11.2 14.6 4.8 -2.6 -4.9 -3.9 4.0 -0.2 0.4 21.2 12.1 16.1 6.5 -10.6 -2.2 -3.0 5.5 1.5

PGF PM Capital Global Opp PGF -0.5 n/a n/a n/a n/a -11.5 n/a n/a n/a n/a -5.2 n/a n/a n/a n/a -16.2 n/a n/a n/a n/a

GVF Global Value Fund GVF 12.2 n/a n/a n/a n/a 6.0 n/a n/a n/a n/a -0.5 n/a n/a n/a n/a -9.4 n/a n/a n/a n/a

ALI Argo Global Infrastructure ALI n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

PAF PM Capital Asian Opp PAF 2.8 n/a n/a n/a n/a 1.1 n/a n/a n/a n/a 0.0 n/a n/a n/a n/a -1.7 n/a n/a n/a n/a

AGF AMP Capital China Grow th AGF 12.2 26.3 13.0 7.7 n/a -3.0 -3.4 -0.4 -5.5 n/a 34.1 31.8 15.1 11.7 n/a 18.9 2.1 1.7 -1.5 n/a

HHY Hastings High Yield HHY -51.3 -7.3 -4.1 -2.2 n/a -61.3 -17.3 -14.1 -12.2 n/a -45.7 0.4 3.5 10.1 n/a -52.2 -13.6 -8.6 -1.4 n/a

ABW Aurora Absolute ABW 1.4 1.7 n/a n/a n/a -2.4 -7.6 n/a n/a n/a -4.0 1.4 n/a n/a n/a -7.8 -7.9 n/a n/a n/a

FGX Future Generation Invest Co FGX 12.4 n/a n/a n/a n/a 8.6 n/a n/a n/a n/a 13.0 n/a n/a n/a n/a 9.2 n/a n/a n/a n/a

FGG Future Gen Global Invest FGG n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

SNC Sandon Capital SNC 2.6 n/a n/a n/a n/a -7.6 n/a n/a n/a n/a -1.6 n/a n/a n/a n/a -11.8 n/a n/a n/a n/a

Specialist

ASX

Code

Pre-tax NTA Share price

ASX Listed

Investment Companies

ASX

Code

Performance (%) Value-add+ (%) Performance (%) Value-add+ (%)


In order to assess a LIC’s performance, NTA and share price need to be evaluated with respect to the relative mandate and/or

benchmark, given varying outcomes from different styles of investment. Hence, for the Domestic LICs we have categorised the

LIC’s Mandate into those with a Large, Large to Medium, Medium to Small, and Small Market Capitalisation investment focus,

Long/Short/Market Neutral, International, and Specialist investment focuses following an analysis of the LIC’s Top Stock Holdings.

In general, the NTA has been benchmarked against the relative indices preferred by the Manager and these should be most

reflective of its mandate. The share price of each LIC, apart from International and Specialist LICs, has been benchmarked

against the All Ordinaries Accumulation Index, given this is the broadest index on the ASX and the exchange in which each LIC

trades. This is arguably a less relevant benchmark.

Our value-add columns seek to quantify the value generated by the Manager. It is the difference between the performance of the

share price and pre-tax NTA against the relevant benchmark. A positive value indicates outperformance against the Benchmark

and a negative value indicates an underperformance. We view the pre-tax NTA value-add as the most relevant measure of

management performance.

Dividends are an important aspect of any investment decision. In the Graph below, we have included historical Net Dividend Yield

and Gross Dividend Yield for the LICs in our universe. Nonetheless, investors must realise that although historical yield is clearly a

key consideration when selecting a LIC, it is no guarantee of future yield. Please note several LICs have recently entered the

market and have not distributed a dividend yet.

Graph 2: Historical Dividend Yield (Net and Gross)

Investment Performance (continued)

Historical Gross Dividend Yield

0%

5%

10%

15%

20%

25%

30%

35%

AF

I

AR

G

DJW AU

I

CY

A

MLT

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Y*

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Div

iden

d Y

ield

Gross Yield Net Yield

*No dividend yield as HHY distributed a capital return over the last 12 months

Lrg Cap mandate

Lrg/Med Cap mandate Med/Sml Cap mandate

Long/Short & Neutral

International Specialist Small

*Includes Special Dividends



We have categorised our universe of LICs according to the percentage premium or discount the share price trades at relative to

the pre-tax NTA.

Table 15: Share Price Premium/Discount versus Pre-Tax NTA

LICs often trade at a consistent premium or discount to NTA, with the standard deviation providing a measure of the range in

which a LIC’s premium/discount normally falls. By determining each LIC’s average premium/discount we can look for anomalies

between average premiums/discounts to NTA and current premiums/discounts to NTA. We have calculated each LIC’s 5-year

average (please note a number of LICs have a history less than 5 years and therefore not included in the graph) share price

premium/discount to reported pre-tax NTA as well as its standard deviation from that average, which we portray in the below

graph. Here, we are trying to convey whether or not a LIC is cheap or expensive compared to its historical average.

Graph 3: Share Price Premium/Discount to Pre-Tax NTA Relative to 5-year Average

The average share price discount to pre-tax NTA remained steady from the previous quarter at 0.7x. In the Large Market

Capitalisation investment focus, AUI looked the most reasonably valued. LICs with Large to Medium Capitalisation investment

mandates continue to trade at substantial premiums, apart from FSI and WHF. Medium to Small and Long/Short mandates are

now starting to look slightly attractive on a historical premium/discount basis. International focused LICs have performed

exceptionally well over the past year in particular, and have traded at historical highs in comparison to their NTAs.

-2.0x

-1.0x

0.0x

1.0x

2.0x

3.0x

AF

I

AR

G

DJW AU

I

CY

A

ML

T

BK

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CIN

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F

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CA

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A

MF

F

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HH

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AG

F

HH

Y*

Sta

nd

ard

Dev

iati

on

Premium/Discount to NTA

Lrg Cap mandate

Lrg-Med Cap mandate Med-Sml Cap mandate Long/Short/Neutral

International/Specialist



% % %

DJW Djerriw arrh Investments 34.0 BKI BKI Investment 4.7 CYA Century Australia -8.0

PMC Platinum Capital 20.3 ALF Australian Leaders Fund 2.6 WMK Watermark Market Neutral -9.7

CDM Cadence Capital 14.4 WAA WAM Active 2.0 PAF PM Capital Asian Opp -10.6

ARG Argo Investments 9.9 MLT Milton Corporation 1.8 PGF PM Capital Global Opp -10.7

WAM WAM Capital 7.7 MFF Magellan Flagship Fund -0.1 WIC WestOz Investment Co. -11.1

WAX WAM Research 7.3 ABW Aurora Absolute -0.3 GVF Global Value Fund -11.2

MIR Mirrabooka 6.2 FGX Future Gen Invest Co -2.5 TGG Templeton Global Grow th -11.8

AFI AFIC 5.7 AMH AMCIL -3.8 HHV Hunter Hall Global Value -12.2

QVE QV Equities -3.8 CIN Carlton Investments -12.3

DUI Diversif ied United -5.0 NCC Naos Emerging Opportunities -12.9

AUI Australian United -5.5 SNC Sandon Capital -13.2

CAM Clime Capital -6.9 AGF AMP Capital China Grow th -15.3

WHF Whitef ield -9.4 ACQ Acorn Capital -16.3

CTN Contango Microcap -16.5

HHY Hastings High Yield -18.8

OZG Ozgrow th -19.5

FSI Flagship Investments -23.2

Substantial premium Approximately in line Substantial discount


-35%

-25%

-15%

-5%

5%

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35%

AF

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X

FG

G

SN

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Sh

are

Pri

ce

Pre

m/D

isc t

o P

os

t-ta

x N

TA

In Graph 4 we have provided some context to the share price premium or discount to pre-tax NTA. Pre-tax NTA reflects realised

capital gains (tax applicable on positions that have been exited) but not unrealised capital gains (tax applicable on positions that

have not been exited).

Graph 4: Share Price Premium/Discount versus Pre-Tax NTA

Graph 5 shows the share price premium/discount against post-tax NTA. Post-tax NTA reflects realised (tax applicable on positions

that have been exited) and unrealised capital gains (tax applicable on positions that have not been exited). While this measure is

arguably less relevant, it does provide additional comparison, particularly when viewed with Graph 4. Post-tax NTA is most useful

in a wind-up scenario.

Graph 5: Share Price Premium/Discount versus Post-Tax NTA

-30%

-20%

-10%

0%

10%

20%

30%

40%

AF

I

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I

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/Dis

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ax N

TA

Premium/Discount to NTA (continued)

Lrg Cap mandate

Lrg-Med Cap mandate

Med-Sml Cap mandate

Long/Short/ Neutral

International

Specialist

Lrg Cap mandate

Lrg-Med Cap mandate

Med-Sml Cap mandate

Long/Short/ Neutral

International

Specialist




Graphs 6 & 7 show the pre-tax NTA performance of each LIC, assuming dividends are reinvested, over the past 3 and 5 years.

This is reflected by its position along the horizontal axis, with LICs further to the right having achieved higher returns. The Graphs

also highlight the share price premium or discount to pre-tax NTA at which each LIC was trading at Quarter End. This is reflected

by each LIC’s position along the vertical axis.

Graphs 6 & 7: Share Price Premium/Discount vs Pre-Tax NTA Performance

Pre-tax NTA performance is one way of reflecting the performance of a LIC’s management and the standard deviation of the

pre-tax NTA performance can be used as a measure of risk by reflecting the movement or dispersion from the average return. The

below graphs can therefore give an indication of a LIC’s risk-return over the time periods.

Graphs 8 & 9: Pre-Tax NTA Performance Standard Deviation vs Pre-Tax NTA Performance


AFI

ARG

DJW

AUICYA

MLT

BKICIN

DUI

WHF

AMHCAM

FSI

MIR

WAM

WAXWAA

ALF

CDM

WMK

PMC

TGG

HHV

XAOAI

4%

6%

8%

10%

12%

14%

16%

0% 5% 10% 15% 20%

5 y

ea

r p

re-t

ax

NT

A p

erf

orm

an

ce

St.

De

v.

5 year pre-tax NTA performance

AFI

ARG

DJW

AUI

CYA

MLT

BKI

CIN

DUI

WHF

AMH

CAM

FSI

WAM

MIR

WIC

WAX

OZG

WAA

CTN

ALF

CDM

MFF

HHV

PMC

TGGPGF

GVF

PAFAGF

HHY*

ABWFGX

-30%

-20%

-10%

0%

10%

20%

30%

40%

-15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35%

Pre

miu

m/D

isc

ou

nt

to p

re-t

ax

NT

A

3 Year pre-tax NTA return

Premium to pre-tax NTA

Discount to pre-tax NTA

AFI

ARG

DJW

AUI

CYA

MLT

BKI

CINDUI WHF

AMHCAM

FSI

WAM

MIR

WIC

WAX

OZG

WAA

CTN

ALF

CDM

MFF

HHV

PMC

TGG

PGF

GVF PAF

AGF

HHY*

FGX

-30%

-20%

-10%

0%

10%

20%

30%

40%

-10% -5% 0% 5% 10% 15% 20% 25% 30%

Pre

miu

m/D

isc

ou

nt

to p

re-t

ax

NT

A

5 Year pre-tax NTA return

Premium to pre-tax NTA

Discount to pre-tax NTA

AFI

ARG

DJW

AUI

CYA

MLTBKI

CIN

DUI

WHF

AMH

FSI

MIR

WAM

WAX

WAA

CTN

ALF

CDM

WMKPMC

TGG

HHV

XAOAI

4%

6%

8%

10%

12%

14%

16%

0% 5% 10% 15% 20% 25%

3 y

ear

pre

-ta

x N

TA

perf

orm

an

ce S

t. D

ev.

3 year pre-tax NTA performance



Outliers: Stock (perf, std dev) CTN (-1.1%, 17.3%) WIC (-4.2%, 16.6%) OZG (-4.4%, 18.0%) AGF ( 13.0%, 26.9%) MFF (24.5%, 12.9%)

Outliers: Stock (perf, std dev) WIC (-6.0%, 16.1%) OZG (-8.1%, 18.3%) AGF (26.3%, 30.6%) MFF (31.8%, 13.2%)


LICs by their very nature can trade at either a premium or discount to pre-tax NTA. However, from a quantitative perspective, we

have noted a tendency for LICs to revert to their mean premium or discount through the Cycle. As such, investors need to be

cognisant of how a LIC trades through the Economic Cycle to ensure an investment is timed appropriately.

As noted in our quarterly in September 2015, Large LICs (Market Cap > $500m) appear to behave differently from Small LICs

(Market Cap < $500m) through the Economic Cycle. Large LICs tend to trade at a substantial premium to pre-tax NTA in

perceivably difficult or uneasy market conditions and a lower premium to pre-tax NTA in perceivably improving market conditions.

One could argue that during uneasy market conditions investors prefer the safety of Large LICs with an established track record

and hence push them up into substantial premiums. Whereas, in more favourable market conditions, investors have a tendency to

view large LICs as a lower return investment alternative and instead favour smaller and more exotic LICs, hence driving large

LICs’ premiums lower.

Graph 10: Large Cap Focused LICs’ Average Share Price Premium/Discount to Pre-tax NTA

However, it is interesting to note, that we are currently in a period where Large LICs are deviating from its norm. Since early 2013,

we see Large LICs trading at a premium to pre-tax NTA - even in a rising market. This phenomenon exist due to an increase of

demand for Large LICs. We associate this greater demand to two underlying factors.

• Future of Financial Advice (FoFA) reforms. Since July 2013, commissions paid to financial planners by providers of

managed fund have been banned going forward. This has removed the incentive for financial planners to use Managed

Funds over LICs or ETFs.

• A competitive dividend yield in comparison to the ASX200. In July 2010, there was a significant change in the

Corporation Act that have paved the way for LICs to offer greater consistency in dividends. Previously, companies could

only pay a dividend if they had an accounting profit, which saw a number of LICs being unable to pay dividends through the

GFC. However, following the introduction of the solvency test, LICs now have greater flexibility to offer sustainable dividend

polices even with the absence of an accounting profit.


-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Dec�00 Dec�01 Dec�02 Dec�03 Dec�04 Dec�05 Dec�06 Dec�07 Dec�08 Dec�09 Dec�10 Dec�11 Dec�12 Dec�13 Dec�14 Dec�15

Average�Premium/Discount�(RHS) All�Ords�(LHS)

Sept 2001: Sept 11 attacks

Mar 2003: Iraq war begins

Apr 2007: US subprime crisis

Sept 2008: Lehman Brothers

collapse

May 2010: First Greek Bailout

Feb 2012: Second Greek Bailout

Jun 2015: Chinese Share Market

Crash

Feb 2003: Market trough

Oct 2007: Market peak

All O

rdin

arie

s In

de

x

Pre

miu

m/D

isco

un

t



Small LICs tend to operate in almost an opposing fashion. In general, Small LICs trade at a larger discount to pre-tax NTA,

averaging an 10.9% discount over the last 8 years, which compares to the Large LICs 2.5% premium over the same period.

Broadly speaking, as market confidence rises, Small LICs tend to trade at a smaller discount as investors’ confidence rises.

However, as market conditions turn, these small discounts tend to turn into deep discounts.

Graph 11: Small Cap Focused LICs’ Average Share Price Premium/Discount to Pre-tax NTA

The graph below shows International LICs’ discounts have historically been pretty much correlated with the global markets. These

LICs traded at varying deep discounts when first introduced, for a combination of both the GFC made investors reluctant to hold

international assets and international vehicles were originally not viewed as the yield making machines as domestic stocks.

However as global share markets rose, so did the demand for these LICs—narrowing these discounts. While, as confidence falls

within the global markets, we tend to see these discounts expand.

Graph 12: International Cap Focused LICs’ Average Share Price Premium/Discount to Pre-tax NTA


All O

rdin

arie

s In

de

x

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Dec�05 Dec�06 Dec�07 Dec�08 Dec�09 Dec�10 Dec�11 Dec�12 Dec�13 Dec�14 Dec�15

Average�Premium/Discount All�Ords


Sept 2008: Lehman Br others collapse




Crash

Oct 2007: Market Peak

Feb 2009: Market Through

Pre

miu

m/D

isco

un

t


-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

7,000

Dec�06 Dec�07 Dec�08 Dec�09 Dec�10 Dec�11 Dec�12 Dec�13 Dec�14 Dec�15

Average�Premium/Discount MSCI


Sept 2008: Lehman Br others collapse




Crash

MS

CI W

orl

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dex

Pre

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LIC Indicative NTA

LICs are only obligated to disclose their NTA at the end of each month and have 14 days to disclose this information to the

Market. This means that an investor is only able to retrospectively gauge the value of the underlying NTA and for the remainder of

the month be ignorant to the underlying value of the NTA.

Bell Potter has sought to address this gap by providing an Indicative Live NTA. We calculate the Indicative NTA by tracking the

underlying NTA each week. This is achieved by monitoring the percentage movements of the Disclosed Holdings and using an

appropriate proxy to track the movement of the remaining positions. We also adjust the NTA when the security goes

ex-dividend.

The Indicative NTA works best with LICs that have a high percentage of investments concentrated in its Top 20 Holdings, regular

disclosure of its holdings and cash position, lower turnover of its investments, and the absence of a performance fee.

Table 16: Indicative Premium/Discount to Pre-Tax NTA (as at 9 February 2016)


Investment Share Fully Diluted Ind. Indicative

ASX Code Company Name Mandate Price Pre-Tax NTA" Prem/Disc" 1 year 3 years 5 years 10 years

AFI AFIC" Large 5.46$ 5.02$ 8.8% 3.4% 3.8% 0.7% 1.3%

ARG Argo Investments Large 7.58$ 6.66$ 13.9% 5.5% 2.3% -0.9% 1.4%

DJW Djerriwarrh Investments Large 4.06$ 2.76$ 47.0% 30.3% 25.1% 20.5% 13.6%

AUI Australian United Investments Large 7.22$ 6.78$ 6.5% -4.5% -5.2% -7.3% -5.2%

CYA Century Australia Large 0.83$ 0.79$ 5.4% -8.8% -8.4% -14.2% -15.0%

MLT Milton Corporation Large/Medium 4.40$ 4.05$ 8.6% 2.1% 0.1% -3.2% -1.2%

BKI BKI Investment Large/Medium 1.62$ 1.44$ 12.3% 2.0% -1.2% -5.6% -9.0%

CIN Carlton Investments Large/Medium 30.25$ 36.86$ -17.9% -10.7% -11.7% -15.6% -14.9%

DUI Diversified United Investments Large/Medium 3.23$ 3.26$ -1.0% -5.6% -6.3% -8.3% -6.1%

WHF Whitefield Large/Medium 4.18$ 4.33$ -3.4% -7.0% -6.5% -8.4% -9.0%

AMH AMCIL Large/Medium 0.87$ 0.86$ 0.9% -4.1% -4.0% -9.7% -9.7%

CAM Clime Capital" Large/Medium 0.78$ 0.93 ^$ -15.9% -7.1% -6.3% -10.9% -15.0%

FSI Flagship Investments Large/Medium 1.34$ 1.86 ^$ -27.8% -14.0% -7.7% -6.9% -6.1%

WAM WAM Capital Medium/Small 2.17$ 1.85$ 17.3% 6.6% 4.9% 0.1% -9.2%

MIR Mirrabooka Investments Medium/Small 2.51$ 2.19$ 14.6% 9.3% 9.9% 3.0% -2.9%

WIC WestOz Investment Co. Medium/Small 0.73$ 0.91 #$ -19.4% -10.2% -10.5% -18.3% -21.1%

WAX WAM Research" Medium/Small 1.36$ 1.14$ 19.4% 5.6% 4.7% -4.2% -14.0%

OZG OzGrowth Medium/Small 0.11$ 0.15 #$ -26.2% -12.1% -15.4% -22.3% n/a

WAA WAM Active Medium/Small 1.06$ 0.98$ 7.3% 1.8% 7.0% 0.7% n/a

CTN Contango Microcap Small/Micro 0.95$ 1.07 ^$ -12.0% -7.8% -10.0% -15.0% -20.7%

ACQ Acorn Capital Invst Fund" Small/Micro 0.82$ 0.97 ^$ -16.3% -18.0% n/a n/a n/a

ALF Australian Leaders Fund" Long/Short 1.47$ 1.36 ^$ 8.1% 6.9% -2.9% -9.0% -13.8%

CDM Cadence Capital" Long/Short 1.42$ 1.34 ^$ 5.8% 0.4% -3.3% -13.5% n/a

NCC NAOS Emerging Opp" Long/Short 0.93$ 1.08 ^$ -13.9% -8.6% n/a n/a n/a

FGX Future Generation Investment Company Fund of Funds 1.14$ 1.15 ^$ -0.6% -1.7% n/a n/a n/a

WMK Watermark Market Neutral" Market Neutral 1.00$ 1.08 ^$ -7.4% -11.3% n/a n/a n/a

SNC Sandon Capital" Activist 0.82$ 0.98 ^$ -16.3% -7.7% n/a n/a n/a

MFF Magellan Flagship Fund" International 1.82$ 1.77 #$ 2.6% 2.6% -6.1% -9.9% n/a

PMC Platinum Capital International 1.62$ 1.48 ^$ 9.7% 0.6% -4.3% 2.5% 11.4%

TGG Templeton Global Growth International 1.11$ 1.32 ^$ -15.8% -9.8% -8.9% -13.7% -15.1%

HHV Hunter Hall Global Value International 1.09$ 1.29 ^$ -15.6% -11.2% -12.9% -13.9% -14.2%

PGF PM Capital Global Opp" International 0.89$ 1.02 ^$ -12.8% -12.8% n/a n/a n/a

GVF Global Value Fund International (Multi Asset) 1.00$ 1.15 ^$ -12.9% -10.2% n/a n/a n/a

AGF AMP Capital China Growth Asia 0.78$ 1.01 ^$ -23.3% -21.9% -20.8% -21.8% n/a

PAF PM Capital Asia Asia 0.87$ 1.01 ^$ -13.9% -13.1% n/a n/a n/a

" The Fully Diluted Indicative NTA has been adjusted for options dilution (100% excercise) and dividends. Dividends are removed from the NTA once the security goes ex-date and until the

receipt of the new ex-dividend NTA . # The Indicative NTA is the actual reported weekly pre-tax NTA as we have been unable to calculate the Indicative NTA within a reasonable level of accuracy.

The Indicative NTA is the actual reported weekly pre-tax NTA as we have been unable to calculate the Indicative NTA within a reasonable level of accuracy.* Average premium/discounts as at

end of the previous month. +Prem/Disc does not adjust for the dilution of unexcercised options.

Average Premium/Discount+


LIC Indicative NTA (continued)

Using the Bell Potter Indicative NTA, we calculate the effective impact on the share price if the premium or discount were to

normalise to the 1, 3, 5 and 10 year average. We have also calculated this figure on an annualised basis.

The Indicative NTA is not without error and clearly susceptible to higher turnover, tax realisation, receipt and payment of dividends

and accrued performance fees. As such, variations will occur across LICs and different market conditions. We have included the

Average Error (average of the monthly NTA less Indicative NTA), Average Absolute Error (average of the monthly NTA less

Indicative NTA on an absolute basis), and the range of Minimum and Maximum Errors over the previous 12-month period.

Table 17: Premium/Discount Normalisation and Error Tracking (as at 9 February 2016)


Investment

ASX Code Company Name Mandate 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years

AFI AFIC" Large -5.4% -5.0% -8.1% -7.5% -5.4% -1.7% -1.7% -0.8% -0.5%

ARG Argo Investments Large -8.3% -11.6% -14.8% -12.5% -8.3% -4.0% -3.2% -1.3% -0.3%

DJW Djerriwarrh Investments Large -16.7% -21.9% -26.5% -33.4% -16.7% -7.9% -6.0% -4.0% 0.2%

AUI Australian United Investments Large -10.9% -11.7% -13.7% -11.7% -10.9% -4.1% -2.9% -1.2% -0.2%

CYA Century Australia Large -14.1% -13.8% -19.5% -20.4% -14.1% -4.8% -4.3% -2.3% -0.2%

MLT Milton Corporation Large/Medium -6.5% -8.5% -11.8% -9.8% -6.5% -2.9% -2.5% -1.0% -0.3%

BKI BKI Investment Large/Medium -10.2% -13.5% -17.9% -21.2% -10.2% -4.7% -3.9% -2.4% -0.2%

CIN Carlton Investments Large/Medium 7.3% 6.2% 2.3% 3.0% 7.3% 2.0% 0.5% 0.3% -0.4%

DUI Diversified United Investments Large/Medium -4.6% -5.3% -7.3% -5.1% -4.6% -1.8% -1.5% -0.5% -0.1%

WHF Whitefield Large/Medium -3.6% -3.2% -5.1% -5.6% -3.6% -1.1% -1.0% -0.6% -0.1%

AMH AMCIL Large/Medium -5.0% -4.9% -10.6% -10.6% -5.0% -1.7% -2.2% -1.1% 0.3%

CAM Clime Capital" Large/Medium 8.9% 9.7% 5.1% 0.9% 8.9% 3.1% 1.0% 0.1% 0.5%

FSI Flagship Investments Large/Medium 13.8% 20.1% 20.9% 21.6% 13.8% 6.3% 3.9% 2.0% n/a

WAM WAM Capital Medium/Small -10.7% -12.4% -17.2% -26.5% -10.7% -4.3% -3.7% -3.0% -1.0%

MIR Mirrabooka Investments Medium/Small -5.3% -4.7% -11.6% -17.5% -5.3% -1.6% -2.4% -1.9% -0.5%

WIC WestOz Investment Co. Medium/Small 9.2% 8.9% 1.1% -1.6% 9.2% 2.9% 0.2% -0.2% n/a

WAX WAM Research" Medium/Small -13.8% -14.7% -23.7% -33.5% -13.8% -5.2% -5.3% -4.0% 0.6%

OZG OzGrowth Medium/Small 14.1% 10.7% 3.9% n/a 14.1% 3.5% 0.8% n/a n/a

WAA WAM Active Medium/Small -5.5% -0.3% -6.6% n/a -5.5% -0.1% -1.4% n/a 0.1%

CTN Contango Microcap Small/Micro 4.3% 2.0% -3.0% -8.7% 4.3% 0.7% -0.6% -0.9% -1.6%

ACQ Acorn Capital Invst Fund" Small/Micro -1.8% n/a n/a n/a -1.8% n/a n/a n/a n/a

ALF Australian Leaders Fund" Long/Short -1.2% -11.0% -17.1% -21.9% -1.2% -3.8% -3.7% -2.4% n/a

CDM Cadence Capital" Long/Short -5.4% -9.1% -19.3% n/a -5.4% -3.1% -4.2% n/a n/a

NCC NAOS Emerging Opp" Medium/Small 5.2% n/a n/a n/a 5.2% n/a n/a n/a n/a

FGX Future Generation Invst Comp Fund of Funds n/a n/a n/a n/a n/a n/a n/a n/a n/a

WMK Watermark Market Neutral" Market Neutral -3.9% n/a n/a n/a -3.9% n/a n/a n/a n/a

SNC Sandon Capital" Activist 8.5% n/a n/a n/a 8.5% n/a n/a n/a n/a

MFF Magellan Flagship Fund" International 0.0% -8.7% -12.5% n/a 0.0% -3.0% -2.6% n/a n/a

PMC Platinum Capital International -9.1% -14.0% -7.2% 1.7% -9.1% -4.9% -1.5% 0.2% n/a

TGG Templeton Global Growth International 6.1% 7.0% 2.2% 0.8% 6.1% 2.3% 0.4% 0.1% n/a

HHV Hunter Hall Global Value International 4.4% 2.7% 1.7% 1.4% 4.4% 0.9% 0.3% 0.1% n/a

PGF PM Capital Global Opp" International 0.0% n/a n/a n/a 0.0% n/a n/a n/a n/a

GVF Global Value Fund Intl (Multi Asset) 2.7% n/a n/a n/a 2.7% n/a n/a n/a n/a

AGF AMP Capital China Growth Asia 1.4% 2.5% 1.4% n/a 1.4% 0.8% 0.3% n/a n/a

PAF PM Capital Asia Asia 0.8% n/a n/a n/a 0.8% n/a n/a n/a n/a

* Refers to the current share price divided by the indicative pre-tax NTA as compared to the average 1, 3, 5 and 10 year Discount/Premium share price to pre-tax NTA as at end of the previous

month, over the relevant time period of 1, 3, 5 and 10 years. * Refers to the current share price divided by the indicative pre-tax NTA as compared to the average 1, 3, 5 and 10 year

Discount/Premium share price to pre-tax NTA as at end of the previous month, annualised over the relevant time period of 1, 3, 5 and 10 years.

Share Price Impact if Premium/Discount normalises*

Share Price Impact if Premium/Discount normalises

is annualised+

Avg Error


LIC Indicative NTA (continued)

A number of LICs under our coverage currently have options outstanding. Options dilute the NTA when exercised and therefore

have an impact on the premium or discount.

Table 18: Dilution Effect of Outstanding Options on Indicative NTA (as at 9 February 2016)


Share Indicative Option

ASX CodeCompany Name Code SOI Options Strike Price NTA^ Price Expiry 100% 70% 50% 100% 70% 50%

AFI AFIC" AFIG 1,125,166,196 1,940,169 5.09$ 5.46$ 5.12$ 110.50$ 28-Feb-17 5.12$ 5.12$ 5.12$ 6.7% 6.7% 6.7%

ARG Argo Investments n/a 676,959,075 n/a n/a 7.58$ 6.66$ n/a n/a

DJW Djerriwarrh Investments n/a 218,589,718 n/a n/a 4.06$ 2.76$ n/a n/a

AUI Australian United Investmentsn/a 109,532,911 n/a n/a 7.22$ 6.78$ n/a n/a

CYA Century Australia n/a 81,865,704 n/a n/a 0.83$ 0.79$ n/a n/a

MLT Milton Corporation n/a 649,001,426 n/a n/a 4.40$ 4.05$ n/a n/a

BKI BKI Investment n/a 568,700,054 n/a n/a 1.62$ 1.48$ n/a n/a

CIN Carlton Investments n/a 26,474,675 n/a n/a 30.25$ 36.86$ n/a n/a

DUI Diversified United Investmentsn/a 206,928,779 n/a n/a 3.23$ 3.26$ n/a n/a

WHF Whitefield n/a 80,208,773 n/a n/a 4.18$ 4.33$ n/a n/a

AMH AMCIL n/a 246,006,664 n/a n/a 0.87$ 0.86$ n/a n/a

CAM Clime Capital" n/a 80,751,049 n/a n/a 0.78$ 0.94$ n/a n/a

FSI Flagship Investments n/a 25,338,038 n/a n/a 1.34$ 1.86$ n/a n/a

WAM WAM Capital n/a 468,006,885 n/a n/a 2.17$ 1.85$ n/a n/a

MIR Mirrabooka Investments n/a 154,744,788 n/a n/a 2.51$ 2.19$ n/a n/a

WIC WestOz Investment Co. WICOA 129,251,548 12,904,671 1.05$ 0.73$ 0.91$ 0.001$ 31-Aug-16 0.906$ 0.906$ 0.906$ -19.4% -19.4% -19.4%

WAX WAM Research" n/a 172,768,120 n/a n/a 1.36$ 1.14$ n/a n/a

OZG OzGrowth OZGOA 361,000,816 36,054,213 0.180$ 0.11$ 0.15$ 0.005$ 31-Aug-16 0.149$ 0.149$ 0.149$ -26.2% -26.2% -26.2%

WAA WAM Active n/a 34,909,728 n/a n/a 1.06$ 0.98$ n/a n/a

CTN Contango Microcap CTNG 161,151,241 265,000 1.30$ 0.95$ 1.07$ 100.000$ 31-Mar-20 1.07$ 1.07$ 1.07$ -12.0% -12.0% -12.0%

ACQ Acorn Capital Invst Fund" n/a 49,889,707 n/a n/a 0.82$ 0.97$ n/a n/a

ALF Australian Leaders Fund" n/a 268,524,479 n/a 1.37$ 1.47$ 1.36$ n/a n/a

CDM Cadence Capital" n/a 268,383,269 n/a 1.43$ 1.42$ 1.34$ n/a n/a

NCC NAOS Emerging Opp" n/a 46,918,297 n/a n/a 0.93$ 1.08$ n/a n/a

FGX Future Generation Invst CompFGXO 189,435,053 176,272,603 1.10$ 1.14$ 1.19$ 0.039$ 16-Sep-16 1.15$ 1.15$ 1.16$ -0.6%# -1.3%# -1.9%#

WMK Watermark Market Neutral"n/a 87,610,397 n/a n/a 1.00$ 1.08$ n/a n/a

SNC Sandon Capital" n/a 44,260,206 n/a n/a 0.82$ 0.98$ n/a n/a

MFF Magellan Flagship Fund" MFFO 464,160,512 78,010,297 1.00$ 1.82$ 1.90$ 0.820$ 31-Oct-17 1.77$ 1.80$ 1.83$ 2.6%# 0.6%# -0.8%#

PMC Platinum Capital n/a 234,571,212 n/a n/a 1.62$ 1.48$ n/a n/a

TGG Templeton Global Growth n/a 249,660,311 n/a 1.00$ 1.11$ 1.32$ n/a n/a

HHV Hunter Hall Global Value n/a 242,433,553 n/a 1.00$ 1.09$ 1.29$ n/a n/a

PGF PM Capital Global Opp" n/a 347,344,401 n/a n/a 0.89$ 1.02$ n/a n/a

GVF Global Value Fund GVFO 73,062,491 50,623,734 1.00$ 1.00$ 1.15$ 0.002$ 17-Mar-16 1.15$ 1.15$ 1.15$ -12.9% -12.9% -12.9%

AGF AMP Capital China Growthn/a 386,294,100 n/a n/a 0.78$ 1.01$ n/a n/a

PAF PM Capital Asia PAFO 55,087,501 55,087,500 1.00$ 0.87$ 1.01$ 0.001$ 31-May-16 1.01$ 1.01$ 1.01$ -13.9% -13.9% -13.9%

The Indicative NTA has been adjusted for dividends once the security goes ex-date and until the receipt of the new ex-dividend NTA . # The Indicative NTA is the actual reported weekly or monthly pre-tax NTA as we

have been unable to calculate the Indicative NTA within a reasonable level of accuracy. * Average premium/discounts as at end of the previous month.

NTA after % Excercised Eff. Prem/Disc after % Exc.


Liquidity

Liquidity is an important characteristic to consider when making an investment. Liquidity is the ability to buy or sell a particular

security . Unfortunately, the volume traded among some LICs can be quite thin at times and may be difficult to trade larger lines

Therefore, liquidity needs to be taken into consideration when investing in this asset class. In the table below, we have a look at

the 3 year Weekly and Monthly Averages for the LICs in our coverage.

Table 19: Liquidity


Investment Shares 3 yr Average 3 yr Average 3 yr Average 3 yr Average

ASX Code Company Name Mandate On Issue Options Weekly Volume Weekly Value Monthly Volume Monthly Value

Domestic Equities

AFI AFIC" Large 1,097,326,895 1,940,169 1,645,218 9,720,557 7,129,278 42,122,413

ARG Argo Investments Large 676,959,075 - 862,059 6,346,067 3,735,589 27,499,622

DJW Djerriw arrh Investments Large 218,589,718 - 512,434 2,301,063 2,220,546 9,971,273

AUI Australian United Investments Large 109,532,911 - 62,904 485,665 272,584 2,104,547

CYA Century Australia Large 81,865,704 - 312,746 265,972 1,355,232 1,152,546

MLT Milton Corporation Large/Medium 649,001,426 - 745,613 3,168,004 3,230,988 13,728,015

BKI BKI Investment Large/Medium 568,700,054 - 1,057,661 1,681,360 4,583,198 7,285,892

CIN Carlton Investments Large/Medium 26,474,675 - 10,582 281,697 45,857 1,220,686

DUI Diversif ied United Investments Large/Medium 206,928,779 - 209,384 702,292 907,333 3,043,263

WHF Whitef ield Large/Medium 80,208,773 - 132,141 534,308 572,609 2,315,335

AMH AMCIL Large/Medium 246,006,664 - 331,187 289,601 1,435,145 1,254,936

QVE QV Equities Large/Medium 202,962,892 166,278,909 902,374 * 928,189 * 3,910,289 * 4,022,151 *

CAM Clime Capital Large/Medium 80,751,049 - 292,358 283,894 1,266,883 1,230,208

FSI Flagship Investments Large/Medium 25,338,038 - 60,112 86,162 260,487 373,370

CBC CBG Capital Large/Medium 24,313,698 24,214,499 68,402 * 65,957 * 296,409 * 285,813 *

WAM WAM Capital Medium/Small 468,006,885 - 2,164,307 4,099,642 9,378,662 17,765,115

MIR Mirrabooka Investments Medium/Small 154,744,788 - 260,532 647,233 1,128,973 2,804,678

WIC WestOz Investment Co. Medium/Small 129,251,548 12,904,671 456,956 510,102 1,980,142 2,210,443

WAX WAM Research Medium/Small 172,768,120 - 587,321 676,980 2,545,056 2,933,582

OZG OzGrow th Medium/Small 361,000,816 36,054,213 1,065,739 194,273 4,618,201 841,852

CTN Contango Microcap Small/Micro 161,151,241 265,000 1,027,102 1,075,864 4,450,774 4,662,079

ACQ Acorn Capital Small/Micro 49,889,707 * - 345,420 * 276,214 * 1,496,819 * 1,196,928 *

BTI Bailador Tech Investments Unlisted Tech 58,336,510 * 58,336,509 158,228 * 143,737 * 685,655 * 622,862 *

ALF Australian Leaders Fund Long/Short 268,524,479 - 1,743,875 2,663,051 7,556,790 11,539,889

CDM Cadence Capital Long/Short 268,383,269 - 1,299,733 1,866,754 5,632,175 8,089,267

WAA WAM Active Long/Short 34,909,728 - 254,808 296,620 1,104,168 1,285,352

NCC Naos Emerging Opportunities Long/Short 46,918,297 * - 223,521 * 230,935 * 968,592 * 1,000,718 *

WMK Watermark Market Neutral Market Neutral 87,610,397 * - 546,224 * 522,122 * 2,366,969 * 2,262,530 *

International Equities

MFF Magellan Flagship Fund International 464,156,179 78,014,630 1,974,061 2,933,849 8,554,265 12,713,344

PMC Platinum Capital International 234,571,212 - 1,281,861 2,175,797 5,554,732 9,428,452

TGG Templeton Global Grow th International 249,660,311 - 1,173,656 1,414,308 5,085,843 6,128,669

HHV Hunter Hall Global Value International 242,433,553 - 1,299,160 1,397,803 5,629,695 6,057,146

PGF PM Capital Global Opp International 347,344,401 * - 1,913,066 * 1,955,479 * 8,289,951 * 8,473,740 *

GVF Global Value Fund International 72,961,491 * 50,724,734 329,931 * 340,974 * 1,429,702 * 1,477,556 *

ALI Argo Global Infrastructure Intl Infra 143,082,314 * 143,044,214 602,671 * 1,149,949 * 2,611,574 * 4,983,112 *

PAF PM Capital Asian Opp Asia 55,087,501 * 55,087,500 310,144 * 295,071 * 1,343,956 * 1,278,643 *

AGF AMP Capital China Grow th China 386,294,100 - 3,272,208 3,577,520 14,179,568 15,502,586

Specialist

HHY Hastings High Yield Fixed income 103,070,369 - 1,835,782 248,373 7,955,053 1,076,282

ABW Aurora Absolute Income 29,886,828 - 298,323 306,756 1,292,734 1,329,275

FGX Future Gen Investment Comp Fund of Funds 184,253,715 181,217,876 1,017,792 * 1,109,106 * 4,410,433 * 4,806,125 *

FGG Future Gen Global Invest Gbl Fnd of Fnd 275,179,167 274,165,166 1,125,044 * 1,247,921 * 4,875,190 * 5,407,658 *

SNC Sandon Capital Activist 44,260,206 - 156,917 * 145,543 * 679,975 * 630,688 *

* History less than 3 years


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ICR

ICR - with performance fee ICR - w/out performance fee

In the Graphs below, we have provided the Indirect Cost Ratio (ICR) for LICs in our coverage for the full year ending 30 June

2015. The ICR has been calculated both with and without performance fees. We are using this method of calculation to

standardise the cost ratios across our LIC universe given the many different interpretations of the Management Expense Ratio,

which is a frequently used expense calculation. ICR is generally accepted as the principal expense ratio calculation for the

Managed Funds industry. Note, a number of LICs have been on the market for less than a year, therefore ICR is non-applicable.

Graph 13: Indirect Cost Ratio

Indirect Cost Ratio: Fees and Expenses

Lrg Cap mandate Lrg/Med Cap mandate Med/Sml Cap mandate Long/Short/ Neutral

International Specialist

N/A


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Appendix A: Glossary of terms Annualised Compound Total Returns: The Annualised Compound Total Return calculates the constant yearly return that would result in the initial value of an investment reaching its present value. Active Management: Investing with the goal of outperforming a benchmark index. Balanced Investing: Investing in securities with neither a preference for Growth or Value investing. Beta: In the context of this report, a Beta is a representation of the tendency of a company’s share price to respond to swings in the Market. A Beta of 1 indicates that a company’s share price will move in line with the Market. A Beta of greater than 1 indicates that a share’s price will be more volatile than the Market. Our Market Proxy is the All Ordinaries Accumulation Index. Dilutive Security: When a company issues additional shares in itself at a price below the current value of existing shares this will have a dilutive effect. Estimated Fully Diluted NTA: Some LICs have additional securities that have the ability to convert to, or create, new ordinary securities in the Company. If a security can be converted to ordinary securities at a price lower than the LIC’s NTA, this will dilute its NTA on a per share basis. Excess Return to Risk Ratio: This ratio, also known as the Sharpe Ratio (see Sharpe Ratio for definition), provides a measure of the return of each portfolio relative to the risk taken by the Investment Manager in achieving that return. A high return is only desirable if it does not come with too much additional risk (volatility of returns - see Standard Deviation). Grossed Up Dividend Yield: Dividends paid plus any franking credits passed on to shareholders. We have focused on this measure to enable valid comparison between LICs whose dividends are franked and those that are not. Growth Investing: Investing in securities with a bias towards higher projected Earnings Per Share growth rates and Return On Equity. Indirect Cost Ratio: The ICR, as defined in the Corporations Act 2001, is the ratio of the Fund’s management costs to average net assets. In layman's terms, it covers all expenditure, excluding transaction and finance costs, in the management of the Fund. This includes management fees, performance fees, marketing, audit, legal, rent, etc. We are using this method of calculation to standardise the cost ratios across our LIC universe, given many different interpretations of the MER calculations by LICs and the inability to confirm the calculation. ICR is generally accepted as the principal expense ratio calculation for the Managed Funds industry. Net Tangible Assets (NTA): Total assets of the Company minus any intangible assets such as goodwill and trademarks, less all liabilities of the Company. This is calculated before any theoretical tax is payable if the entire portfolio was sold. The largest liability of most LICs is the Management Fee, while some LICs also provide for performance fees, should the LIC’s portfolio achieve certain benchmarks. Management fees are generally a reflection of how actively a portfolio is managed as well as its size. Option Adjusted Portfolio Return: A LIC’s calculated portfolio return over a period may be negatively impacted if there are new securities issued during a period. This is because the Manager will not have been able to generate returns off the new funds over the entire period, which will detract from the performance of the overall portfolio. Accordingly, where new securities have been issued in a LIC we will remove the impact of those securities creating an Option Adjusted Portfolio Return. Passive Management: Investing in an attempt to track the return of the underlying benchmark index. Typically a passively managed portfolio has good diversification, low turnover (good for keeping down internal transaction costs), and lower management fees. Premium/Discount to Pre-Tax NTA: While share prices of LICs are generally based around their NTA, the vagaries of supply and demand, as well as the market perception of a company's outlook, mean that a LIC’s share price may move substantially below (discount) or above (premium) its NTA. ��


Appendix A: Glossary of terms (continued) Renounceable Rights Issue: This is an offer by the LIC to shareholders to purchase more shares in the Company. Given these rights are normally issued at a discount they have an inherent value that can be traded on the ASX. Stapled Options: These are options that cannot be traded individually. They are attached to a share or similar security and this combined security must be traded in a ‘bundle’. Total Shareholder Return (TSR): Highlights total increase in the value of $100 invested in a LIC over a given period by a shareholder on the assumption that dividends are reinvested. TSR takes into account grossed up dividends paid as well as share price appreciation and may differ from share price performance in this regard. Value Investing: Investing in securities that appear to be undervalued taking in to consideration certain valuation metrics.


Appendix B: Disclosures

� WAM Research (WAX): WAX announced an Equity Raising on 28 October 2013. WAM paid a service fee equal to 1.0% (excluding GST) of the Application Monies provided. Bell Potter Securities and its Advisers shared in this Fee.

� Australian Leaders Fund (ALF): ALF announced an Equity Raising on 24 October 2013. ALF paid a service fee equal to 1.25% (excluding GST) of the Application Monies provided. Bell Potter Securities and its Advisers shared in this Fee.

� WAM Capital (WAM): WAM announced an Equity Raising on 14 October 2013. WAM paid a stamping fee equal to 1.0% (excluding GST) of the Application Monies provided. Bell Potter Securities and its Advisers shared in this Fee.

� Watermark Market Neutral Fund (WMK): WMK listed on 18 July 2013. WMK paid a stamping fee equal to 1.0% (excluding GST) of the Application Monies provided with valid Application Forms bearing a Licensee’s stamp to the extent Shares were allotted. Bell Potter Securities and its Advisers shared in this Fee.

� Clime Capital (CAM): CAM announced a Renounceable Right Issue on 13 February 2013. CAM paid a stamping fee equal to 1.0% (excluding GST) of the Application Monies provided with valid Application Forms bearing a Licensee’s stamp to the extent Shares were allotted. Bell Potter Securities and its Advisers shared in this Fee.

� Cadence Capital (CDM): CDM announced an Equity Raising on 14 January 2013. CDM paid a stamping fee equal to 2.0% (excluding GST) of the Application Monies provided with valid Application Forms bearing a Licensee’s stamp to the extent Shares were allotted. Bell Potter Securities and its Advisers shared in this Fee.

� Australian Leaders Fund (ALF): ALF announced an Equity Raising on 19 December 2012. ALF paid a stamping fee equal to 1.0% (excluding GST) of the Application Monies provided with valid Application Forms bearing a Licensee’s stamp to the extent Shares were allotted. Bell Potter Securities and its Advisers shared in this Fee.

� Cadence Capital (CDM): CDM announced an Equity Raising on 20 September 2012. CDM paid a stamping fee equal to 2.0% (excluding GST) of the Application Monies provided with valid Application Forms bearing a Licensee’s stamp to the extent Shares were allotted. Bell Potter Securities and its Advisers shared in this Fee.

� WAM Capital (WAM): WAM announced an Equity Raising on 23 July 2012. WAM paid a stamping fee equal to 1.0% (excluding GST) of the Application Monies provided with valid Application Forms bearing a Licensee’s stamp to the extent Shares were allotted. Bell Potter Securities and its Advisers shared in this Fee.

� PM Capital Global Opportunities Fund (PGF): Bell Potter Securities was a Joint Lead Manager of the PM Capital Global Opportunities Fund IPO on 12 December 2013. PGF paid a service fee equal to 1.25% (excluding GST) of the Application Monies provided with valid Application Forms bearing a Licensee’s stamp to the extent Shares were allotted. Bell Potter Securities and its Advisers shared in this Fee.

� Platinum Capital (PMC): Bell Potter Securities was a Co-Manager of the Platinum Capital Placement in November 2013 and received a fee for the service.

� Watermark Market Neutral Fund (WMK): WMK announced a Placement on 24 March 2014. WMK paid a stamping fee equal to 1.0% (excluding GST) of the Application Monies provided with valid Application Forms bearing a Licensee’s stamp to the extent Shares were allotted. Bell Potter Securities and its Advisers shared in this Fee.

� Clime Capital (CAM): CAM announced a Placement on 20 March 2014. CAM paid a service fee equal to 1.5% (excluding GST) of the Application Monies provided with valid Application Forms bearing a Licensee’s stamp to the extent Shares were allotted. Bell Potter Securities and its Advisers shared in this Fee.

� Future Generation Investment Fund (FGX): FGX paid a service fee equal to 1.82% (excluding GST) of the Application Monies provided with valid Application Forms bearing a Licensee’s stamp to the extent Shares were allotted. Bell Potter Securities and its Advisers shared in this Fee.

� PM Capital Asia (PAF): PAF paid a service fee equal to 1.50% (excluding GST) of the Application Monies provided with valid Application Forms bearing a Licensee’s stamp to the extent Shares were allotted. Bell Potter Securities and its Advisers shared in this Fee.

� Acorn Capital Investment Fund (ACQ): Bell Potter Securities was a Joint Lead Manager of the Acorn Capital Investment Fund IPO on 1 May 2014, but did not receive a Corporate Fee for this Service. ACQ paid a service fee equal to 1.5% (excluding GST) of the Application Monies provided with valid Application Forms bearing a Licensee’s stamp to the extent Shares were allotted. Bell Potter Securities and its Advisers shared in this Fee.

� Global Value Fund (GVF): GVF paid a service fee equal to 2.50% (excluding GST) of the Application Monies provided with valid Application Forms bearing a Licensee’s stamp to the extent Shares were allotted. Bell Potter Securities and its Advisers shared in this Fee.

� Magellan Flagship Fund (MFF): Bell Potter Securities was a Co-Manager of the MFF Renounceable Rights issue in May 2015 and received a fee for the service.

� Argo Global Listed Infrastructure (ALI): Bell Potter Securities was a Co-Lead Manager for this IPO in July 2015 and received a fee for the service.

10 february 2016 december quarter 2015 listed investment ...€¦ · december quarter 2015 nathan...

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