Ann: Changes to allowable investments, page-48

Seems hard to me to compare ALF NTA with long only funds. The ALF NTA is $327 million, but it has short exposure of $298 million and long exposure of $318 million. They can potentially earn money on BOTH exposures by good stock selection, even though only net exposure plus cash goes into NTA. They traded at a premium because they WERE consistently earning money on both the long and short exposures through good stock selection rather than general market movements. Over last 3 years they made 5.7%pa through market movements, but 12.9%pa from stock selection. The disappointing thing is they have not been making money recently on the short exposures when the market has been falling. Over the last year they made 1.3% from the market, but LOST 4.4% on stock selection (and 9.5% in the last six months due mainly to short positions in some biotechs evidently). I bought ALF as a protection against a falling market and they have not provided protection. Until they get back to better stock selection they seem likely to trade near NTA (which is mainly cash, given the net share exposure is near zero). I assume they can still pick up dividends and franking credits on the long exposures and have reserves to cover dividend payments for ALF as well.