Profit Reserve

Basically yes. They have enough cash in the profit reserve to pay a 1.35 cent quarterly dividend for 11 years even if they do not make a profit for the next 11 years.

Money put in the profit reserve is profit put aside for the payment of dividends. This is payments to you forgone now to be paid later when there is not enough profit made during the quarter for a dividend.

This is one advantage of LICs in that they can retain some profit in the good times, in the profit reserve, to pay out as dividends in the bad times when little or no profit is available.

In contrast, if PIA was structured as a trust (like ETFs, FOR or MGF for example) they would have to pay out all profit as it is made. A trust does not have a profit reserve. This is why people say LICs have smoother returns then trusts which have less consistent, lumpy returns.

I believe the profit reserve is included as part of the NTA. Where is this money? Is it earning us a return? What currency is this money held as? Are we paying performance fees on this money?

What is the opportunity cost to you of having this money tied up in the profit reserve rather than paid to you now?

Is 11 years profit reserve excessive when 3 to 5 years worth would achieve the same comfort level? I can’t think of a reason for doing this other than bragging rights. Not even any of the Wilson LICs have gone this far. Could all this cash make PIA a target for WAR? (Not sure about the accounting rules here.)

I will be looking closely at the annual report to find some answers.