Ann: Net Tangible Asset Backing - January 2020, page-7

I don't understand what this is supposed to mean: "All management companies have value based on what they manage. Incuding Glennon Capital"

If you are saying all investment management companies have value I certainly don't agree. There is one that hasn't performed for years and has had to delist a few of their funds as the discount just got too much. I know of another couple that, in my opinion, haven't really taken into account risk and have taken huge risk which really was the risk of the shareholders. One of these ended up as part of PCG if I recall correctly. I think if you look to the fact that MG has done sterling work ( my opinion) to try to fix the BHD issues then we can all see the risks we have being in anLIC. I think we are heading in the right direction here and think that those that can see value will start buying once the trend is confirmed we all have forgotten that on 31 December the before tax NTA was 90.8c, at 31 December 2019 it was 96.49c and at 31 January 2020 it was $1.00. If this LIC keeps getting me at least 6% growth in NTA each year and supplies me with a return above 4.5% including franking then I will be happy. The irony is that at the same time last year it was trading around 84 /85c and the gap was less but the 2018 last quarter was a shocker yet this year the last quarter and the year has been much better but we are around 82c. I will be buying a few more on the market before it goes ex-dividend.

I can agree that TOT buying reduced the sp discount but they then made an offer that the shareholders could easily have done better themselves. The developments were completing and the remainder of the assets were listed equities. Had the shareholders agreed to pay to Contact a fee and would it down they would have had a shell company to part with - Not sure if that has value given LIC's. Not sure having to take the offer did anything but improve the buyers' position.

We agree on PM funds and at $400 million they have roughly the same discount to NTA as here. My point is unless you are merging with a Wilson fund it's unlikely you will move the discount. The reality is that I am sure the smaller players are circling and would love to take this over but I would oppose it and seek to create an environment whereby it would be easier to pay a fee and wind up this company rather than end up in someone else's LIC that I never intended to get in the first place.

Having looked at the financials I see that holding cash hurts the most as, currently, you get nothing in the way of dividends so whilst I think that at times I would like to time the market in a corporate structure its best to keep at least 80% invested even if at times you may want to invest in a hybrid to achieve that. It is clear that we need to generate at least a return of 3c fully or mostly franked which would give all of us above 5% return including franking. I applauded them for being brave to go to cash - now I see that I was wrong it hurts far too much.

I think the lesson learned is that in a low-interest-rate environment the worst thing is to have cash as overheads and management fees still get charged and you don't make anything like what you need to service the needs of shareholders and the overheads.