Ann: Net Tangible Asset Backing, page-5

"also in regard to discount to NTA. if the difference is too great the funds are taken off the market"

It is not at all surprising that funds with a large discount to NTA get dissolved.I have no way of knowing if the following actually happens, but this is what could happen. If a fund has a chronic discount of, let's say, 20%, then the fund managers and/or their associates could buy millions of shares onmarket at a 20% discount, then close down the fund, pay out the shareholders including themselves and make an instant 20% profit. Couldn't be an easier way to make millions, and perfectly legal.

In LSF's case, the managers who have large holdings appear to be in it for the long term. So, any discount is unlikely to be of great concern to them. So, serious measures to reduce any discount are unlikely to be introduced. Dividends, while coincidentally helping to reduce the discount, are of benefit to the large holders because the dividends provide them with a large chunk of extra wealth from the pool of franking credits.

If a fund is wound up, I am not sure what happens to any unused franking credits. Anybody here actually know? No guesses, please.