interest, page-11

Hello all,

I agree with you guys on the way LICs now use portfolio returns. It is a very deceptive way to market to shareholders and none of them explain very well the exact way they calculate portfolio return. My biggest gripe is the way that they probably include capital raising from shareholders and returns on new money in their portfolio performance. They do not explain it from a shareholder return perspective. Unless they explain themselves better, I think that portfolio returns are more a way of judging which LIC can raise the most money from shareholders rather than their performance as stock pickers or shareholder return. Media appearances and connections with stock brokers is more important than portfolio (NTA) performance when considering their self-rated portfolio performance.

I calculate my own return figures based on share prices, dividends, dividend re-investment schemes, bonus rights values, etc. (but not options). Based on my figures CTN assuming re-investment of dividends has performed an average of +2.7%p.a. on the ASX300 Accumulation index Year-on-Year, rolling month-end data since listing. This is one of the best LICs that I follow. It is also true their performance, like the Small Ords index, has been poor over the last couple of years. But two years is a very short time to hold a LIC IMO. If you want to reproduce the above number I use dividend re-investment prices when available or end-of month price when no scheme exists (Morningstar uses ex-date price).

I also agree with Dreamer4 that a buyback at a discount to NTA benefits shareholders. I do have a problem when they (not CTN) issue shares to professional investors at a discount to NTA. I had a gripe about this on the CAM forum.

Of course you should do your own calculations, I make mistakes.