Listed Investment Companies

Transcription

1 Listed Investment Companies January 2016 Opportunity to invest in a diversified equity exposure Page 2 What are Listed Investment Companies (LICs)? Page 2 Choosing a Listed Investment Company Page 3 Advantages of investing in LICs Page 4 Risks and Considerations of investing in LICs Page 4 ASX LICs Monthly Update Page 5 Net Tangible Asset (NTA) comparison Page 6 Annualised LIC share price performance Page 7 Dividend focus Page 8 Recent and upcoming distributions Page 9 Premium/Discount to NTA (%) history Page 10 Glossary Page 12 Appendix Page 14 returns Page 14 Dividends Page 15 Liquidity analysis Page 16 Snapshots Page 17 Disclaimer Page 39

2 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 v-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 v-15 Dec-15 Jan-16 Opportunity to invest in a diversified equity exposure What are Listed Investment Companies (LICs)? LICs are companies, listed on the ASX, which manage a portfolio of assets on behalf of their investors. By owning shares in LICs, investors are able to gain exposure to diversified portfolios that are managed by investment professionals. LICs are closed-end funds where shareholders join or leave the investment by buying or selling the LIC shares on the ASX. The resulting stable funds under management (FUM) allow the manager to make decisions on a long term basis. A number of LICs strive to pay stable fully franked dividends (although dividends are set at the discretion of the manager with respect to profitability and solvency of the company) which may satisfy investors desire for tax effective income. The investment manager may be internal or external to the LIC. The investment styles of LICs can be classified into three broad categories: Australian shares invest principally in ASX-listed shares International shares invest principally in shares listed on international stock exchanges Absolute / specialist LICs include long/short equities, absolute return strategies, fund of fund vehicles, private equity, unlisted assets and multi-asset strategies. Investment approaches vary and can range from conservative to aggressive. When deciding whether or not to invest in a LIC, investors should consider whether the structure, investment style and underlying portfolio suit their personal investment objectives. The ASX-listed LICs sector has expanded from A$ 24.1 billion in January 2014 to A$ 30.1 billion in December Recent market weakness has seen this total retrace to A$28.9 billion in mid January. The second chart below shows the monthly proportionate value traded for LICs with a trend towards international equities. The recent shift to alternatives can be partly attributed to the buy-back and winding up of Global Resource Masters Fund Limited (GRF) and the December 2015 listing of Absolute Equity Performance Fund Limited (AEG) which saw elevated interest following a positive debut. Listed Investment Companies market capitalisation Trends A$ billion 30 Market cap for LICs Source: MWM Research, Iress, Morningstar, January 2016 Monthly value traded % 1% Alternatives / Specialist 2 8 International Equities 7 26% % 4 54% 3 Australian Equities 2 1 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Source: IRESS, January 2016 Page 2 of 39

3 AFI ARG MLT WAM DJW BKI CIN AUI DUI CDM MIR WHF PIC WAX FGX AMH QVE CTN WIC WDE MFF URF PMC AGF PGF FGG TGG PAI HHV ALI AUF EMF EAI EGI PAF ALF BAF USF TOP AYZ GVF BTI AYD GRF Choosing a Listed Investment Company (LIC) Net Tangible Asset Backing (NTA) LICs report net tangible asset backing (NTA) for the company on a monthly basis. The NTA is the market valuation of the underlying investments and is reported on a pre-tax basis and post-tax basis (where the capital gains tax obligation of liquidating all holdings is taken into account). As LICs are closed-end funds they may trade at, above or below the most recent NTA valuation due to liquidity risk and investor sentiment. Increasingly, LICs are reporting NTA on a more frequent basis (weekly or even daily) to provide more up to date information to investors. Management and performance fees LICs incur a fee for management of the portfolio, which is paid out of FUM. The management fee is also referred to as the management expense ratio (MER). It normally ranges between 0.1% and 1.5% of FUM, with larger LICs incurring MER at the low end of the range as they are able to spread their fixed costs over a greater FUM. A performance fee may also be incurred, calculated with reference to the performance of the portfolio against a benchmark and paid to the investment manager in accordance with the investment management contract. Larger LICs benefit from scale (lower fees) A$ Mil Market cap (LHS) Management expense ratio (RHS) Australian equities International Equities Absolute / Specialist % Source: IRESS, January 2016 Company/management risk The LIC investor takes on the risk and performance of the underlying investments, as well as the risk of the LIC as an operating entity. The NTA only takes into account the value of the investments at a fixed date. Assessments of the competency of management and desirability of the investment strategy of the LIC may lead investors to apply a premium or discount to the existing portfolio. Liquidity risk LICs are not typically highly liquid, though the underlying investments may be. This mismatch in liquidity may lead to investors preferring to purchase a LIC at a discount to NTA. Unlike ETFs, contracted market makers are not appointed to provide minimum spreads. See the appendix for average trading spreads. Dividend timing Dividends may be paid by the underlying investments through the year, while the LIC may pay semiannual or quarterly dividends. The NTA price may include the value of dividends that have been received by the LIC and not yet paid out. Expected change in value of underlying investments The NTA is a valuation at a fixed point in time. If the market moves subsequent to this date, the LIC share price may pre-empt the change to NTA. At times investment themes may lead to LICs trading at a price that deviates from underlying value. For example when investors are pursuing yield, LICs which pay fully franked dividends may trade at a higher premium to NTA than when negative investment environments prevail. Page 3 of 39

4 Advantages of investing in LICs Low costs The MER for most ASX-listed LICs ranges from 0.1 to 1.5 per annum. The MERs for the three largest Australian equity LICs (AFI, ARG, MLT) are amongst the most competitively priced with all three below 0.2 reflecting their larger scale. Many LICs do not charge performance fees. While LICs do not charge exit fees (like managed funds), bid/offer spreads and brokerage do need to be accounted for. Diversification LICs may hold a large number of companies (50 to 100 stocks) in their portfolio, providing an efficient means of diversification with the purchase of a single security. Differentiation The characteristics and strategies of LICs may suit different investor needs. Transparency LICs release portfolio updates to the ASX in order to meet their continuous disclosure obligations. The majority of LICs publish their top holdings each month while all disclose their full portfolios in their financial statements. The ASX publishes a monthly NTA report accessible via this link. Larger LICs communicate regularly with their investors, holding investor seminars as well as annual general meetings. Investor access LICs can be traded during market trading times and there are no minimum investment amounts or holding periods beyond those applied by the ASX to all listed securities. Income Investors can seek LICs that strive to pay stable, franked dividends. The three largest Australian equity LICs have continually paid 10 franked dividends since Certain Australian resident taxpayers can claim a tax benefit where a component of the dividend is sourced from realised eligible LIC capital gains. Shareholders should consult their tax advisor. Risks and Considerations of investing in LICs Investment style Investors need to review the characteristics of the underlying portfolio prior to investment to verify the philosophy of the LIC. Security may trade at prices higher or lower than NTA LIC share prices may trade higher or lower than NTA. If an LIC is trading at a discount to NTA there is no quick mechanism to close the gap (though sometimes other interested parties will try to have the manager replaced or the venture wound up). control over the timing of realisation of capital gains Shareholders have no control over the timing of realisation of capital gains, which are at the discretion of the LIC. Also the tax treatment may not be the same across different taxable entities. Shareholders should consult their tax advisor if they are unsure or have any questions. Performance fees Some LICs (notably smaller specialist LICs) charge performance fees in addition to the MER. Derivatives and gearing LICs can leverage the portfolio by using options and/or derivatives. Shareholders should check whether the LIC uses leverage and what limits are in place. Page 4 of 39

5 AGF TGG EMF WIC EAI MFF ALI PMC PGF FGG PAI CDM PAF AUF EGI GVF PIC DUI AMH DJW HHV QVE AUI BKI ARG AFI WAM FGX MIR WAX MLT CTN WHF CIN ASX LICs Monthly Update The chart below shows the movements in pre-tax NTA during December. Pre-tax NTA growth, December % -5% -1-15% -2, January 2016 The AMP Capital China Growth Fund (AGF) NTA retraced 18.1% through December, trading ex dividend on 29 December with a dividend of $ payable on 31 March 2016, subject to repatriation of funds from China. On a total return basis the fund was positive for the month, returning 3.1%. The dividend was much larger than the previous year s (292) and was primarily composed of realised capital gains with the portfolio manager selling into strength during mid The US listed Morgan Stanley China A Share Fund (CAF.NYS) distributed a similarly large dividend from capital gains. AGF also provided investors with an update of estimated expenses to the year ending 31 December AMP estimates the cost of extraordinary expenses incurred during the year at 0.08% of fund assets. AGF suffered through early January as Chinese equity volatility increased dramatically with AGF continuing to trade on the ASX despite trading in China being suspended twice in the first week of the year. Carlton Investments (CIN) was the best performer of the larger LICs for the second consecutive month, adding 6.4% on a pre-tax NTA basis. This reflected CIN s concentrated position in Event Hospitality and Entertainment Ltd (EVT, previously Amalgamated Holdings Limited) of 49.5% which increased 9.3% during December. Absolute Equity Performance Fund (AEG) enjoyed a successful listing in mid December with a 12% premium to NTA sustained in recent weeks. AEG employs a market neutral investment strategy via long/short pair trades on ASX listed securities and derivatives. The portfolio was fully invested after two weeks and had a net market exposure of +3.3% as at 31 December Short positions in Primary Healthcare (PRY) and Sonic Healthcare (SHL) worked well through the month while a pair trade of long Beach Energy (BPT) and AGL Energy (AGL) weighed on performance. The Global Resource Masters Fund (GRF) announced on 18 December it would look to wind up the fund with at least 9 of the net assets to be returned to shareholders via a proposed capital return. The move followed shareholders approving on 17 vember an on-market buyback of up to 5 of the issued capital of GRF. The company was able to purchase 13.2 million shares, equivalent to 28.6% of the issued capital, in the following month to 16 December. The majority of these shares were purchased at approximately $1.35 between 8 and 18 December. The company stated the significant shareholder demand for participation in the on-market buyback suggests that the 5 buyback limit will be insufficient to accommodate all existing shareholders wishing to exit their investment in GRF. GRF will hold a general meeting on the proposed return of capital on 19 February Assuming this vote is successful, a further meeting will be held to vote on winding up the fund, with a 75% majority required. GRF will continue to operate the on-market buyback (up to the approved 5 capacity), given the demand from investors to exit their positions, with shares to be purchased either at or below NAV. The underlying portfolio positions have now been mostly liquidated with the fund to hold 10 cash. It is intended the initial capital return will account for at least 9 of GRF s net assets, with a second smaller distribution to follow once the winding up process has been completed. Page 5 of 39

6 WDE BAF HHV AUF PGF EAI WAX USG PIC URF BKI CTN WHF DJW CIN AUI CDM QVE PAI MLT EMF FGX TGG DUI AFI WAM MFF MIR FGG AMH ALI ARG WIC PMC ALF AGF TOP Net Tangible Asset (NTA) Comparison The two charts below rank the LICs by premium/discount to pre-tax NTA as at 31 December Premium / discount to pre-tax NTA Australian Equities % 1.8% 4.7% 4.8% 5.7% 6.2% 8.4% 9.9% CTN CIN WHF WIC PIC AUI DUI QVE AMH FGX MLT BKI WAX AFI MIR WAM ARG CDM DJW, January 2016 Premium / discount to pre-tax NTA International Equities % -12.3% -9.4% -8.2% -7.4% -5.5% % -3.8% -2.9% -2 AGF PGF HHV TGG GVF PAF ALI EGI AUF EAI MFF EMF PAI FGG PMC, January 2016 Monthly percentage movements in premium / discounts -15.3% -12.6% -12.2% -11.8% -11.2% -10.6% 20.3% 10.1% 6.8% 3.3% -1.1% -0.1% -4.5% % 8% 6% 4% 2% -2% -4% -6%, January 2016 Page 6 of 39

7 Annualised LIC Share Price Performance The tables below illustrate the share price performance of LICs which have been listed for at least 5 years. As can be seen, international equity strategies have delivered the best total returns in recent years, primarily from an uplift in capital values. Australian equity total returns have been less compelling but a better source of dividend payments, particularly when accounting for franking credits. Further information on returns and standard deviations is included in the appendix. A summary snapshot page is also provided for the largest, most liquid LICs, including the manager s investment thesis and a brief history of the fund. 1-Year return classified by Investment style (%) Capital Dividend 40 Australian Equities International Equities Absolute / Specialist AFI ARG MLT BKI DJW WAM CIN AUI DUI CDM MIR WHF AMH WAX CTN WIC MFF AGF PMC TGG HHV AUF ALF GRF IPE WAA 3-Year annualised return classified by Investment style (%) Capital Dividend 40 Australian Equities International Equities 30 Absolute / Specialist AFI ARG MLT BKI DJW WAM CIN AUI DUI CDM MIR WHF AMH WAX CTN WIC MFF AGF PMC TGG HHV AUF ALF GRF IPE WAA 5-Year annualised return classified by Investment style (%) Capital Dividend 30 Australian Equities International Equities 20 Absolute / Specialist AFI ARG MLT BKI DJW WAM CIN AUI DUI CDM MIR WHF AMH WAX CTN WIC MFF AGF PMC TGG HHV AUF ALF GRF IPE WAA Source: IRESS, January 2016 Page 7 of 39

8 Dividend focus Managers of LICs place a great emphasis on dividend payments given the primarily retail investor base. The majority of Australian equity LICs listed below have a long track record of paying fully franked dividends with the largest LICs (AFI, ARG, MLT) having paid 10 franked dividends for over 20 years. 12 Months Net dividend yield and Gross dividend Yield (%) % Dividend 12m Yld- Net Dividend 12m Yld -Gross 45 Australian Equities International Equities Absolute / 40 Specialist AFI ARG MLT BKI DJW WAM CIN AUI DUI CDM MIR WHF AMH WAX QVE FGX CTN WIC MFF AGF PMC TGG HHV AUF URF ALF WAA Source: IRESS Bloomberg, January 2016 Franking accounts The chart below illustrates the Australian equity LICs with the largest franking credit balances, normalised by the LIC s asset base. A larger franking credit balance provides a degree of certainty future dividends will be fully franked with the potential for franking credits to be returned via capital management strategies. Australian LICs - Franking credit balances ($m) Franking Credits (LHS) Franking credits as % of assets (RHS) MIR DJW CIN MLT AUI CDM FGX AFI BKI WAX, January 2016 (%) Page 8 of 39

9 Recent and upcoming distributions Code Name Ex-Date Pay Date Dividend Franking Type IPE IPE 11-v-15 2-Dec I na CBC CBG Capital 18-v v F $ WHF Whitefield 20-v Dec I $ AYD Australian Masters Yield Fund 1 23-v-15 4-Dec-15 $ I na AYH Australian Masters Yield Fund 2 23-v-15 4-Dec-15 $ I na AKY Australian Masters Corporate Bond Fund 5 23-v-15 4-Dec-15 $ I na AYZ Australian Masters Yield Fund 5 30-v Dec-15 $ I na AYJ Australian Masters Yield Fund 3 30-v Dec-15 $ I na AYK Australian Masters Yield Fund 4 30-v Dec-15 $ I na AQF Australian Governance Masters Index Fund 3-Dec Dec S $ IBC Ironbark Capital 7-Dec Dec I na URF US Masters Residential Property Fund 29-Dec Jan F na AGF AMP Capital China Growth Fund 29-Dec Mar-16 $ F na EMF Emerging Markets Masters Fund 29-Dec Jan I na ABW Aurora Absolute Fund 29-Dec Jan I $ AYF Australian Enhanced Income Fund 29-Dec Jan-16 $ % I na AUP Aurora Property Buy-Write Income Trust 29-Dec Jan-16 $ I $ AIB Aurora Global Income Trust 29-Dec Jan I $ CAM Clime Capital 4-Jan Jan I na ALR Aberdeen Leaders 7-Jan-16 4-Feb I na MIR Mirrabooka Investments 20-Jan-16 9-Feb I na DJW Djerriwarrh Investments 28-Jan Feb-16 $ I na WIC Westoz Investment Company 1-Feb Feb I na OZG Ozgrowth Limited 1-Feb Feb I na Source: IRESS, January 2016 Page 9 of 39

10 Premium/Discount to NTA (%) history (as at 31 December 2015) 1 Australian Foundation Investment Company (AFI) $7.0 2 WAM Capital (WAM) $2.5 8% 6% 4% 2% -2% -4% -6% -8% -1 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 15% 1 5% -5% -1-15% -2-25% $2.0 $1.5 $1.0 $0.5 15% Argo Investments (ARG) $9.0 Carlton Investments (CIN) $ $8.0 $7.0-5% $40.0 $35.0 5% $6.0-1 $30.0 $5.0 $4.0-15% $25.0 $20.0-5% $3.0-2 $ $2.0 $1.0-25% $10.0 $5.0-15% -3 1 Milton Corporation (MLT) $6.0 1 Australian United Investment Company (AUI) $10.0 5% $5.0 5% $9.0 $8.0 $4.0 $7.0 $6.0-5% $3.0-5% $5.0-1 $2.0-1 $4.0 $3.0-15% -2 $1.0-15% -2 $2.0 $1.0 1 BKI Investment Company (BKI) $2.0 5% Diversified United Investment (DUI) $4.5 5% -5% -1-15% -2 $1.8 $1.6 $1.4 $1.2 $1.0 $0.8 $0.6 $0.4 $0.2-5% -1-15% -2-25% -3 $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 4 Djerriwarrh Investments (DJW) $6.0 2 Cadence Capital (CDM) $1.8 35% 3 25% 2 $5.0 $4.0 $ $1.6 $1.4 $1.2 $1.0 $0.8 15% $2.0-2 $ % $1.0-3 $0.4 $0.2-4 Page 10 of 39

11 25% Mirrabooka Investments (MIR) $3.0 AMP Capital China Growth Fund (AGF) $ % 1 5% $2.5 $2.0-5% -1-15% $2.0 $1.5 $ % -1-15% -2-25% $1.0 $0.5-25% -3-35% -4 $1.0 $0.5 Whitefield (WHF) $6.0 25% Platinum Capital (PMC) $2.5-2% -4% $ % $2.0-6% -8% -1 $4.0 $3.0 $ % -5% $1.5 $1.0-12% -14% $ % $0.5-16% -2 5% AMCIL (AMH) $1.2 5% Templeton Global Growth Fund (TGG) $1.8 $1.0 $1.6 $1.4-5% $0.8-5% $1.2-1 $0.6-1 $1.0 $0.8-15% $0.4-15% $0.6-2 $0.2-2 $0.4 $0.2-25% -25% 15% WAM Research (WAX) $1.4 1 Hunter Hall Global Value (HHV) $1.6 1 $1.2 5% $1.4 5% $1.0 $1.2-5% -1 $0.8 $0.6-5% -1-15% $1.0 $0.8 $0.6-15% $0.4-2 $0.4-2 $0.2-25% $0.2-25% -3 1 Magellan Flagship Fund (MFF) $2.5 25% Australian Leaders Fund (ALF) $2.0 5% -5% -1-15% -2-25% $2.0 $1.5 $1.0 $ % 1 5% -5% -1-15% -2-25% -3 $1.8 $1.6 $1.4 $1.2 $1.0 $0.8 $0.6 $0.4 $0.2 Page 11 of 39

12 Glossary Benchmark LICs often provide an indicator or benchmark against which their portfolio performance can be compared. Capital management LICs may increase or decrease the amount of capital held by offering share buybacks, dividend reinvestment plans and/or share purchase plans. These mechanisms allow shareholders to increase or decrease their holdings without brokerage fees being charged. Dividend/distribution reinvestment plan () A company may offer shareholders the opportunity to reinvest their dividend in the LIC s shares. This allows the LIC to retain cash which may be consumed by participating in the s of their investee companies or other purchases of securities. A allows shareholders to increase their shareholding without brokerage fees. A discount may be offered on the price of the new shares. Dividend Type Dividends are denoted interim (I), final (F) or special (S). Dividend yield Dividend yield is defined as dividend over the last 12 months divided by current share price. Payment of a dividend is determined at the discretion of the manager. t all LICs pay or intend to pay a dividend. Funds under management (FUM) FUM is the quantum of funds available to the LIC for investment. Liquidity risk Whereas many of the underlying investments of LICs may be highly liquid (able to be traded in sizeable volumes without moving the share price significantly), LICs do not trade as robustly. It is wise to check the liquidity of the LIC when deciding how much to invest. LICs may hold investments that are illiquid, facing liquidity risks in their operations. Listed investment company (LIC) LICs are closed-end vehicles, allowing the company to concentrate on investment selection rather than potential redemptions. Liquidity is provided to shareholders via trading on the ASX. The manager may issue new shares where investment opportunities arise or buy-back and cancel shares in order to reduce the size of the funds under management. Some LICs manage the investment portfolio to minimise tax and produce regular income through fully franked dividends. Listed investment company capital gains A LIC capital gain is a capital gain made directly by a listed investment company. If the dividend paid by a LIC includes the capital gain, shareholders who are Australian residents can claim an income tax deduction. The LIC advises its shareholders how much of the dividend is attributable to a LIC capital gain. Refer: Listed investment trusts (LITs) LITs have an open-ended structure meaning that investors can buy or sell their units on the ASX or directly buy from or sell to the Trust. LITs must pay all surplus income in the form of distributions, which carry the franking levels of the underlying investments distributions. Management expense ratio (MER) The MER is the cost to manage the investments of the LIC (and therefore the cost to the shareholder). The LIC may use internal or external management. Page 12 of 39

13 Net tangible assets (NTA) Pre-tax NTA is calculated by valuing the aggregate portfolio at market prices and dividing by the number of shares on issue. The NTA figure is also quoted on a post-tax basis, where any tax that would be payable on the realisation of the portfolio is taken into account. Performance fee Some LICs receive a performance fee, where the investment management stipulates and the performance exceeds the benchmark. The performance fee may be structured so that after a period of poor performance the LIC s performance has to exceed prior highs before being payable. Share purchase plan (SPP) ASIC has granted relief to allow companies to offer a share purchase plan where investors may apply for new shares at a predetermined price without being charged brokerage. The amount is restricted to $15,000 per investor per annum. A discount may be offered on the price of the new shares. Share buyback Companies may offer a share buyback program, purchasing shares on market (or potentially off-market) to reduce the FUM. Page 13 of 39

14 Appendix returns at 31 December 2015 LICs Name Share price total return (%) standard deviation (%) 1M 3M 1 Yr 3 Yr 5 Yr 1 Yr 3 Yr 5 Yr Australian Equities AFI Australian Foundation Investment ARG Argo Investments MLT Milton Corporation BKI BKI Investment DJW Djerriwarrh Investments WAM WAM Capital CIN Carlton Investments AUI Australian United Investment DUI Diversified United Investment CDM Cadence Capital MIR Mirrabooka Investments WHF Whitefield Limited PIC Perpetual Equity Investment AMH AMCIL Limited WAX WAM Research QVE QV Equities FGX Future Generation Invst Company International Equities MFF Magellan Flagship Fund AGF AMP Capital China Growth Fund PMC Platinum Capital PGF PM Capital Glb Opport. Fund TGG Templeton Global Growth Fund FGG Future Generation Global Invest PAI Platinum Asia Investments HHV Hunter Hall Global Value ALI Argo Global Listed Infrastructure Alternative/Specialist URF US Masters Residential Property ALF Australian Leaders Fund Source: IRESS, Bloomberg, January 2016 Page 14 of 39

15 Dividend yield, net and grossed up at 31 December 2015 LICs classified by Style 1 Yr DPS Growth (%) 3 Yr DPS Growth (%) 5 Yr DPS Growth (%) 12m Gross div. Yld (%) 12m Net div. Yld (%) Australian Equities AFI Australian Foundation Investment ARG Argo Investments MLT Milton Corporation BKI BKI Investment DJW Djerriwarrh Investments WAM WAM Capital CIN Carlton Investments AUI Australian United Investment DUI Diversified United Investment CDM Cadence Capital MIR Mirrabooka Investments WHF Whitefield Limited PIC Perpetual Equity Investment AMH AMCIL Limited WAX WAM Research QVE QV Equities FGX Future Generation Invst Company International Equities MFF Magellan Flagship Fund AGF AMP Capital China Growth Fund PMC Platinum Capital PGF PM Capital Glb Opport. Fund TGG Templeton Global Growth Fund FGG Future Generation Global Invest PAI Platinum Asia Investments HHV Hunter Hall Global Value ALI Argo Global Listed Infrastructure Alternative/Specialist URF US Masters Residential Property ALF Australian Leaders Fund Source: IRESS Bloomberg, January 2016 Page 15 of 39

16 LICs liquidity analysis at 31 December 2015 Code Company 3M avg traded vol 3M avg daily value traded 6M avg traded vol 6M avg daily value traded Bid ask spread (A$) Bid ask spread/price ratio Australia Equities AFI Australian Foundation Investment 281,539 1,638, ,970 1,929, % ARG Argo Investments 135,094 1,039, ,306 1,194, % MLT Milton Corporation 142, , , , % BKI BKI Investment 141, , , , DJW Djerriwarrh Investments 76, ,296 91, , % WAM WAM Capital 420, , , , % CIN Carlton Investments 2,797 88,617 2,421 75, % AUI Australian United Investment 15, ,560 14, , % DUI Diversified United Investment 51, ,142 48, , CDM Cadence Capital 295, , , , % MIR Mirrabooka Investments 46, ,482 47, , % WHF Whitefield Limited 32, ,894 30, , % PIC Perpetual Equity Investment 179, , , , % AMH AMCIL Limited 39,825 34,529 45,124 39, % WAX WAM Research 187, , , , % QVE QV Equities 167, , , , FGX Future Generation Invst Comp. 264, , , , % International MFF Magellan Flagship Fund 301, , , , % AGF AMP Capital China Growth Fund 727, ,342 1,057,515 1,342, % PMC Platinum Capital 169, , , , % PGF PM Capital Glb Opport. Fund 483, , , , % TGG Templeton Global Growth Fund 138, , , , % FGG Future Generation Global Invst. 204, , % PAI Platinum Asia Investments 276, , HHV Hunter Hall Global Value 220, , , , % ALI Argo Global Listed Infrastructure 118, , , , % Alternative/Specialist URF US Masters Residential Property 47, ,971 57, , % ALF Australian Leaders Fund 268, , , , % Source: IRESS, Bloomberg, January 2016 Page 16 of 39

17 Australian Foundation Investment Company Limited Australian Foundation Investment Company Limited (AFI) invests in Australian companies with high quality assets, brand and/or business footprints. AFI is the largest LIC on the ASX and has been listed since The management expense ratio is amongst the lowest available and there is no performance fee. AFI has 1.9 million 6.25% $100 convertible notes on issue (ASX code AFIG) which convert to ordinary shares at $ at the holders' request. AFI has offered a share purchase plan (SPP) to investors in recent years with a 5% discount in 2015, while the dividend reinvestment plan () is also active with a 2.5% discount in place. The investment team, led by Mark Freeman as Chief Investment Officer, seeks well-managed companies with strong fundamentals which are able to pay steady dividends. The investment horizon is the medium to long term, with the aim of providing attractive total returns and fully franked dividends which grow at a faster rate than inflation. AFI typically holds 70 to 100 stocks with an expected annual portfolio turnover of 5%. AFI also operates a trading portfolio, limited to 1 of the total portfolio, in order to take advantage of shorter-term opportunities in the market. AFI operates a 'buy and write' option strategy to generate extra income with the monthly report disclosing which portfolio holdings have active option positions. AFI Last Price - 31 Dec 15 $5.95 Pre-Tax NTA - 31 Dec 15 $5.63 Premium/discount to NTA 5.68% Premium/discount avg (5yr) 0.62% Securities on issue 1,097,326,895 Market cap (m) $6,079 Listed options on issue Management Fee 0.16% Internal Dividends (past 12mth) $0.23 Dividend Yield (past 12mth) 3.9% Franking level (past 12mth) 100. Gross dividend yield (past 12mth) 5.5% discount 2.5% Semi-annual Value traded 1 mth ($m) 28.9 Value traded 12 mth ($m) Average spread (%) 0.23 Benchmark = S&P ASX 200 Accumulation Index Performance fee = ne Dividend Franking (cps) (%) 7/08/ /08/2015 F /02/ /02/2015 I /08/ /08/2014 F /02/ /02/2014 I % 4.39% 2.15% 9.52% % 12.34% 13.78% (19/01/16) AFI price history $6.40 $6.20 $6.00 $5.80 $5.60 $5.40 Page 17 of 39

18 AMP Capital China Growth Fund AGF s main objective is to achieve long-term capital growth for investors by investing in China. The benchmark is the S&P/CITIC 300 Index. AGF provides access to China A shares as a holder of a qualified foreign institutional investor licence. China A shares are Renminbi denominated shares issued by companies registered in mainland China and listed on the Shanghai and Shenzhen exchanges. The AGF portfolio holds its largest weights to the financial services and industrials sectors, in line with the benchmark, while being underweight energy. The largest overweight position relative to the benchmark is health care. AGF s management fee is 1.65% pa of the value of the fund s assets, plus a performance fee of 2 of outperformance above the benchmark. The fund is unhedged and is subject to movements in the foreign exchange markets. The fund has historically traded at a 2 discount to its NTA and has moved to more frequent reporting of its NTA to help address this. AGF Last Price - 31 Dec 15 $1.11 Pre-Tax NTA - 31 Dec 15 $1.31 Premium/discount to NTA % Premium/discount avg (5yr) % Securities on issue 386,294,100 Market cap (m) $328 Listed options on issue Management Fee 1.65% External Dividends (past 12mth) $0.34 Dividend Yield (past 12mth) 30.5% Franking level (past 12mth) 0. Gross dividend yield (past 12mth) 30.5% discount 0. Annual Value traded 1 mth ($m) 17.9 Value traded 12 mth ($m) Average spread (%) 0.65 Benchmark = S&P/CITIC 300 return index (Converted into A$) Performance fee = 2 of outperformance above the benchmark Dividend Franking (cps) (%) 29/12/ /03/2016 F 29/12/ /03/2015 F /12/ /03/2014 F /12/ /03/2013 I % 18.26% 34.14% 31.06% 13.87% % 29.45% 26.89% (19/01/16) AGF price history $1.90 $1.69 $1.48 $1.27 $1.06 $0.85 Page 18 of 39

19 Argo Investments Limited Argo Investments Limited (ARG) invests in Australian listed securities and short-term interest bearing securities. The Company has no debt and has a market capitalisation of $5.2bn, which places it within Australia's top 100 listed companies. Argo is internally managed, had an expense ratio of 0.15% in the year to June 2015 and does not charge a performance fee. Net tangible assets is reported on a monthly basis. The underlying portfolio is constructed to provide steady returns over the long run, by diversifying over a wide range of securities in the Australian market, typically approximately 100 companies and trusts. Argo's investment function is led by Jason Beddow, Managing Director, having joined the firm in 2001 as an analyst and promoted to Chief Investment Officer in The team seeks to identify well-managed businesses with the potential to generate growing and sustainable profits to fund increasing dividend payments. A majority of its revenue is generated by the dividends and distributions received from the companies in the portfolio. The investment team seeks to purchase companies, or add to existing holdings, below their calculated long-term value. Portfolio holdings are generally only sold due to takeovers or when the outlook for the industry or company has deteriorated significantly. ARG Last Price - 31 Dec 15 $8.00 Pre-Tax NTA - 31 Dec 15 $7.28 Premium/discount to NTA 9.89% Premium/discount avg (5yr) -1.24% Securities on issue 676,959,075 Market cap (m) $4,935 Listed options on issue Management Fee 0.15% Internal Dividends (past 12mth) $0.30 Dividend Yield (past 12mth) 3.7% Franking level (past 12mth) 100. Gross dividend yield (past 12mth) 5.3% discount 2. Semi-annual Value traded 1 mth ($m) 23.5 Value traded 12 mth ($m) Average spread (%) 0.20 Benchmark = S&P ASX 200 Accumulation Index Performance fee = ne Dividend Franking (cps) (%) 17/08/ /09/2015 F /02/ /03/2015 I /08/ /09/2014 F 11/02/ /03/2014 I % % 12.86% 8.17% % 12.29% 14.06% (19/01/16) ARG price history $8.60 $8.30 $8.00 $7.70 $7.40 $7.10 Page 19 of 39

20 Australian United Investment Company Limited Australian United Investment Company Limited (AUI) is an Australian investment company holding a portfolio of securities predominantly comprising shares of ASX listed companies. AUI s funds are invested in shares of companies listed primarily in the ASX300. AUI is an investment company which seeks, through portfolio management, to reduce risk and improve income from dividends and interest over the longer term. Investments are purchased or subscribed for on the basis of the directors' assessment of their individual prospects for income and growth. AUI mainly invests in ASX listed securities using the S&P/ASX 300 Accumulation Index as its performance benchmark. AUI Last Price - 31 Dec 15 $7.40 Pre-Tax NTA - 31 Dec 15 $7.83 Premium/discount to NTA -5.49% Premium/discount avg (5yr) -6.99% Securities on issue 109,532,911 Market cap (m) $760 Listed options on issue Management Fee 0.1 Internal Dividends (past 12mth) $0.33 Dividend Yield (past 12mth) 4.5% Franking level (past 12mth) 100. Gross dividend yield (past 12mth) 6.5% discount 0. Semi-annual Value traded 1 mth ($m) 1.8 Value traded 12 mth ($m) 28.7 Average spread (%) 0.50 Benchmark = S&P ASX 300 Accumulation Index Performance fee = 2 of outperformance above the benchmark Dividend Franking (cps) (%) 2/09/ /09/2015 F /02/ /03/2015 I /09/ /09/2014 F /02/ /03/2014 I % 1.01% -1.69% 8.82% 5.98% % 15.48% 17.63% (19/01/16) AUI price history $8.80 $8.40 $8.00 $7.60 $7.20 $6.80 Page 20 of 39

21 BKI Investment Company Limited BKI Investment Company Limited (BKI) is an Australian investment company which invests in a diversified portfolio of Australian shares, trusts and interest bearing securities. The company is a long-term investor in companies, trusts and interest bearing securities with a focus on Australian entities. Some 30 years since the inception of the core portfolio, BKI s investment strategy is focused on research driven, active equities management, investing for the long term, in profitable companies, with a history of paying attractive dividend yields. The stock selection is bottom up and research driven, focusing on the merits of individual companies rather than market and economic trends. BKI targets a 9 to 95% dividend pay out ratio of Net Operating Profit. BKI Last Price - 31 Dec 15 $1.69 Pre-Tax NTA - 31 Dec 15 $1.61 Premium/discount to NTA 4.66% Premium/discount avg (5yr) -5.89% Securities on issue 568,700,054 Market cap (m) $899 Listed options on issue Management Fee 0.18% Internal Dividends (past 12mth) 7 Dividend Yield (past 12mth) 4.3% Franking level (past 12mth) 100. Gross dividend yield (past 12mth) 6.1% discount 0. Semi-annual Value traded 1 mth ($m) 5.0 Value traded 12 mth ($m) 77.4 Average spread (%) 0.49 Benchmark = S&P ASX 300 Accumulation Index Performance fee = ne Dividend Franking (cps) (%) 5/08/ /08/2015 F /02/ /02/2015 I /08/ /08/2014 F /02/ /02/2014 I % 10.85% 11.48% 10.28% % 15.29% 15.92% (19/01/16) BKI price history $1.80 $1.74 $1.68 $1.62 $1.56 $1.50 Page 21 of 39

22 Carlton Investments Limited Carlton Investments Limited (CIN) is an investment company investing and holding in shares and units in entities listed on the Australian Securities Exchange with a long term investment horizon. CIN invests in Australian listed entities that provide both high levels of income through predominantly franked dividends and long term capital growth, and holds its equity investments for the long term and not for trading purposes. Investments are generally only disposed of through takeover, mergers or other exceptional circumstances that may arise from time to time. Carlton Investments Group entities do not act as share traders nor do they invest in speculative stocks. CIN Last Price - 31 Dec 15 $33.91 Pre-Tax NTA - 31 Dec 15 $38.66 Premium/discount to NTA % Premium/discount avg (5yr) % Securities on issue 26,474,675 Market cap (m) $847 Listed options on issue Management Fee 0.09% Internal Dividends (past 12mth) $1.08 Dividend Yield (past 12mth) 3.2% Franking level (past 12mth) 100. Gross dividend yield (past 12mth) 4.5% discount Semi-annual Value traded 1 mth ($m) 1.1 Value traded 12 mth ($m) 17.4 Average spread (%) 1.05 Benchmark = S&P ASX 200 Accumulation Index Performance fee = ne Dividend Franking (cps) (%) 31/08/ /09/2015 F 2/03/ /03/2015 I 29/08/ /09/2014 F 27/02/ /03/2014 I 5.97% 16.93% 23.86% 23.28% 16.45% % 17.69% 17.81% (19/01/16) CIN price history $35 $34 $33 $32 $31 $30 $29 $28 Page 22 of 39

23 Djerriwarrh Investments Limited Djerriwarrh Investments Limited (DJW) invests in Australian equitieswith a focus on stocks predominantly in the ASX 50. DJW was listed on the ASX during DJW aims to provide shareholders with attractive investment returns through access to a steady stream of fully franked dividends and capital growth. The investment philosophy is built on taking a medium to longer term view of value, which means the company tends to buy and hold individual stocks for the long term based on business strategy of the companies, their underlying value and growth prospects. The company also uses exchange traded options to enhance income returns to investors. DJW sells options on stocks in the portfolio which generates additional income via option premiums. The level of covered-call options typically range between 2 to 5 of the total portfolio. DJW Last Price - 31 Dec 15 $4.30 Pre-Tax NTA - 31 Dec 15 $3.21 Premium/discount to NTA 33.96% Premium/discount avg (5yr) 19.7 Securities on issue 218,589,718 Market cap (m) $940 Listed options on issue Management Fee 0.41% Internal Dividends (past 12mth) $0.26 Dividend Yield (past 12mth) 6. Franking level (past 12mth) 100. Gross dividend yield (past 12mth) 8.6% discount Semi-annual Value traded 1 mth ($m) 4.3 Value traded 12 mth ($m) Average spread (%) 0.58 Benchmark = S&P ASX 200 Accumulation Index Performance fee = ne Dividend Franking (cps) (%) 28/01/ /02/2016 I 4/08/ /08/2015 F 29/01/ /02/2015 I 5/08/ /08/2014 F 0.94% 4.62% -1.08% 7.58% 5.82% % 17.46% 19.72% (19/01/16) DJW price history $5.00 $4.80 $4.60 $4.40 $4.20 $4.00 Page 23 of 39

24 Diversified United Investment Limited Diversified United Investment Limited (DUI) is an investment company that invests in a diversified portfolio with the objective of obtaining its current income and longer term capital gain within an acceptable level of risk. The philosophy is to take a medium to long term view and to invest in Australian equities and short term deposits. Investments may also be made from time to time in listed property trusts, fixed interest securities, convertible notes or international equities. DUI Last Price - 31 Dec 15 $3.41 Pre-Tax NTA - 31 Dec 15 $3.59 Premium/discount to NTA -5.01% Premium/discount avg (5yr) -8.45% Securities on issue 206,928,779 Market cap (m) $664 Listed options on issue Management Fee 0.13% Internal Dividends (past 12mth) $0.14 Dividend Yield (past 12mth) 4.1% Franking level (past 12mth) 100. Gross dividend yield (past 12mth) 5.9% discount 0. Semi-annual Value traded 1 mth ($m) 1.9 Value traded 12 mth ($m) 50.5 Average spread (%) 0.64 Benchmark = S&P ASX 300 Accumulation Index Performance fee = ne Dividend Franking (cps) (%) 2/09/ /09/2015 F /02/ /03/2015 I /09/ /09/2014 F /02/ /03/2014 I % 4.41% 11.27% 7.55% % 17.79% 20.23% (19/01/16) DUI price history $3.80 $3.70 $3.60 $3.50 $3.40 $3.30 $3.20 $3.10 Page 24 of 39

25 Future Generation Global Investment Company Limited Future Generation Global Investment Company Limited (FGG) is an internationally focused listed investment company with the dual objectives of providing investors with diversified exposure to global equities while also helping to improve the lives of young Australians who are affected by mental health issues. The company is expecting to have 10 to 20 fund managers, by having a number of different fund managers the company will have access to a range of investment styles and strategies. The company believes that the diversification of styles and strategies used by the different underlying funds in its portfolio is important in managing and mitigating risk in the company's portfolio. The company expects its portfolio will largely comprise investments in funds with exposure to global equities. The company may invest directly in securities (or similar investments) and may also retain cash where it is of the view it is prudent to do so. FGG Last Price - 31 Dec 15 $1.17 Pre-Tax NTA - 31 Dec 15 $1.06 Premium/discount to NTA 10.1 Premium/discount avg (5yr) 1.29% Securities on issue 275,208,667 Market cap (m) $314 FGGO Listed options on issue 274,135,666 Management Fee 1.0 External Dividends (past 12mth) 0 Dividend Yield (past 12mth) 0. Franking level (past 12mth) 0. Gross dividend yield (past 12mth) 0. discount ne Value traded 1 mth ($m) 2.8 Value traded 12 mth ($m) 23.5 Average spread (%) 2.33 Dividend (cps) 0.86% 7.34% Benchmark = benchmark Performance fee = ne Franking (%) (19/01/16) FGG price history $1.20 $1.16 $1.12 $1.08 $1.04 $1.00 Page 25 of 39

26 Hunter Hall Global Value Limited HHV invests in domestic and international stocks using a valued based investment approach. Stocks trading under intrinsic value are selected with a bias towards small-mid cap stocks. HHV holds a high portion of the portfolio in Australia while being underweight in other regions (US, Europe and Asia) when compared to the benchmark and peers that invest globally. HHV s investments are bound by the ethical investment policy where investments harmful to humans or the environment are removed. The portfolio carries high stock-specific risk due to the high concentration in individual companies such as Sirtex Medical Limited (SRX) and St Barbara (SBM). HHV pays a management fee of 1.5% per annum (payable on a monthly basis) to the investment manager. The performance fee equates to 15% of any outperformance above the benchmark (MSCI World Net s Index in A$). HHV Last Price - 31 Dec 15 $1.18 Pre-Tax NTA - 31 Dec 15 $1.34 Premium/discount to NTA % Premium/discount avg (5yr) % Securities on issue 242,433,553 Market cap (m) $267 Listed options on issue Management Fee 1.5 Internal Dividends (past 12mth) 8 Dividend Yield (past 12mth) 6.8% Franking level (past 12mth) 0. Gross dividend yield (past 12mth) 6.8% discount 0. Semi-annual Value traded 1 mth ($m) 3.1 Value traded 12 mth ($m) 98.3 Average spread (%) 0.64 Benchmark = MSCI World Accumulation Net Index in A$ Performance fee = 15% of investment portfolio compared to its benchmark in A$ Dividend Franking (cps) (%) 3/09/ /09/2015 S /09/ /09/2015 F /04/ /04/2015 I /09/ /10/2014 F % 8.76% -3.38% 18.74% 10.72% % 20.0 (19/01/16) HHV price history $1.50 $1.40 $1.30 $1.20 $1.10 $1.00 Page 26 of 39

27 Magellan Flagship Fund Limited MFF is an LIC with two main objectives: to maximise risk adjusted aftertax returns for shareholders by investing in outstanding companies at below their assessed intrinsic value and to minimise the risk of permanent loss for their shareholders. MFF seeks to identify companies with competitive and scale advantages and strong cash flows. By selecting companies with these characteristics, the portfolio is skewed towards multinationals and large US companies, with exposure to Europe and Asia obtained indirectly via multinationals listed in the US. The portfolio is concentrated with the top 5 holdings representing over 5 of the assets held. individual position, at cost, exceeds 1 of the company s investment assets, except where pre-approved by the board up to a limit of 2. MFF has a borrowing limit of 2 of investment assets. The use of derivatives and short-selling is very limited. MFF may use currency hedging, but does not anticipate hedging non-$a cash flows or investments in the current exchange rate and economic environment. MFF holds its cash predominately in US dollars. The performance fee is A$ 2 million if total shareholder s return exceeds 1 p.a., capped at $6m to 31 December MFF Last Price - 31 Dec 15 $2.10 Pre-Tax NTA - 31 Dec 15 $2.10 Premium/discount to NTA -0.1 Premium/discount avg (5yr) -8.89% Securities on issue 464,156,179 Market cap (m) $849 MFFO Listed options on issue 78,014,630 Management Fee 1.25% External Dividends (past 12mth) 2 Dividend Yield (past 12mth) 1. Franking level (past 12mth) 50. Gross dividend yield (past 12mth) 1.2% discount 0. Semi-annual Value traded 1 mth ($m) 9.9 Value traded 12 mth ($m) Average spread (%) 0.64 Benchmark = benchmark Performance fee = 1 outperformance, capped at $2m per annum. Dividend Franking (cps) (%) 13/10/ /11/2015 F /04/ /05/2015 I /10/ /11/2014 F /04/ /05/2014 I % 12.83% 16.65% 32.27% 25.34% % 21.64% (19/01/16) MFF price history $2.20 $2.10 $2.00 $1.90 $1.80 $1.70 Page 27 of 39

28 Mirrabooka Investments Limited Mirrabooka Investments Limited (MIR) is an investment company specializing in small and medium sized companies located with Australia and New Zealand. The company's general definition of small and medium sized companies is those companies which fall outside the top 50 listed companies, by market capitalization, on the Australian Stock Exchange (ASX) or are in the S&P/ASX Mid Cap 50s or Small Ordinaries Index. The portfolio has a medium to long-term investment horizon. Securities purchased that grow to be reclassified as large will not necessarily be sold if the company is satisfied with investment prospects. The company typically holds between stocks depending on their fit with its investment aims and the desired concentration of risk within the portfolio. Portfolio performance is benchmarked against the Small Ordinaries Accumulation Index and the Mid Cap 50 Accumulation Index. MIR Last Price - 31 Dec 15 $2.58 Pre-Tax NTA - 31 Dec 15 $2.43 Premium/discount to NTA 6.17% Premium/discount avg (5yr) 6.03% Securities on issue 142,877,561 Market cap (m) $366 Listed options on issue Management Fee 0.67% Internal Dividends (past 12mth) $0.10 Dividend Yield (past 12mth) 3.9% Franking level (past 12mth) 100. Gross dividend yield (past 12mth) 5.5% discount 5. Semi-annual Value traded 1 mth ($m) 1.4 Value traded 12 mth ($m) 29.7 Average spread (%) 1.12 Benchmark = S&P ASX Mid Cap 50 and Small Ord Accu. Indices Performance fee = ne Dividend Franking (cps) (%) 20/01/ /02/2016 I 22/07/ /08/2015 S /07/ /08/2015 F /01/ /02/2015 I % 4.45% % 12.74% % 25.13% 24.86% (19/01/16) MIR price history $2.90 $2.80 $2.70 $2.60 $2.50 $2.40 Page 28 of 39