Share Price Target is sub-$3 and Full Disclosure Report

Hi All
Pacific Current have released the Aurora Trust Accounts which has been a good step in being transparent with investors in this stock. Have read through and put down my thoughts on share price and the business shape, believe it is pretty sick. It appears due to liabilities company will achieve limited growth outside of current funds owned. Interested in thoughts and feedback.
SHARES ON ISSUE – PAC
Pacific Current has 28,125,955 shares on issue as at this Annual Report. This will grow as Class B shareholders in Aurora Trust increasingly convert PAC shares.
The Aurora Trust has 38,947,404 shares on issue in total (23,837,479 Class A and 15,099,925 Class B).
When converting Class B shares, there are time-based incentives for Northern Lights and BNP Paribas to continue to hold shares in the trust and not convert into PAC shares until 24 November 2019.
Following are time-based scenarios that relate to current ownership of PAC and what the current share price is:

	Column 1	Column 2	Column 3	Column 4
0	Scenario	Agreed conversion	PAC shares on issue after conversion	Market Capitalisation and forecast price
1	Class B shares converted up until 24 November 2017	1.5 Class B Trust share for 1 PAC share OR 2 PAC shares for every 3 PAC shares	Current – 28,125,955 Future – 38,192,572 Current shareholders own 73% of future company	Assuming current share price ($4) is efficient price, market capitalisation would be $152,770,288. If Current Market Capitalisation ($112.503M) is efficient value, then share price is forecast to be $2.94
2	Class B shares converted up until 24 November 2019	1.2 Class B Trust share for 1 PAC share OR 5 PAC shares for every 6 PAC shares	Current – 28,125,955 Future – 40,709,226 Current shareholders own 69% of future company	Assuming current share price ($4) is efficient price, market capitalisation would be $162,836,904. If Current Market Capitalisation ($112.503M) is efficient value, then share price is forecast to be $2.76
3	Class B shares converted up beyond 24 November 2019	1 Class B Trust share for 1 PAC share	Current – 28,125,955 Future – 43,225,880 Current shareholders own 65% of future company	Assuming current share price ($4) is efficient price, market capitalisation would be $172,903,520. If Current Market Capitalisation ($112.503M) is efficient value, then share price is forecast to be $2.60

NET ASSETS AND SHARE BACKING
The Aurora Trust has Net Assets of $322,802,109. The following calculated share price value assuming the Net Assets are the true value (to be debated):

	Column 1	Column 2	Column 3
0	Shares on issue	Calculation	Share Price​
1	Up to 24 November 2017 - 38,192,572	$322,802,109/38,192,572	$8.45​
2	Up to 24 November 2019 - 40,709,226	$322,802,109/40,709,226	$7.92​
3	Post November 2019 - 43,225,880	$322,802,109/43,225,880	$7.46​

Assuming Seizert Capital is written off to $0, despite current management sticking their head in the sand, reduce net assets by $42,340,493, therefore net assets value is $280,461,616. Re-run the above table:

	Column 1	Column 2	Column 3
0	Shares on issue	Calculation	Share Price​
1	Up to 24 November 2017 - 38,192,572	$280,461,616/38,192,572	$7.34​
2	Up to 24 November 2019 - 40,709,226	$280,461,616/40,709,226	$6.88​
3	Post November 2019 - 43,225,880	$280,461,616/43,225,880	$6.48​

Reducing Net Assets by Seizert Capital Partners is debateable as we could potentially not repay the debt if they decrease in value. Depends on the terms of the agreement. Current outstanding debt is approximately $25 Million.
KEY LIABILITIES

	Column 1	Column 2	Column 3
0	Description	Liability	Notes
1	Additional share of Seizert acquired with debt instrument issued to owners	$AUD 25,479,866	Aurora Trust is accruing interest rate payment at a 5% rate above LIBOR. Growing approximately $AUD1.8 Million per annum.
2	Northern Lights Owners (current and ex directors, along with Laird Norton and BNP Paribas)	$AUD 43,562,157	Liability is US dollar based and increases when AUD decreases.

The above liabilities are in US dollars and are debt, just a proportion is due payable to by PAC, however the full liability will be applied assuming Trust issues shares PAC shares.
They need to pay the following this year:
Aperio – $21.875 M for remaining share of ownership
The above highlights approximately $89 Million of payments due over the next five years. The funds for this would require the disposal of one fund to pay for it or raising of capital.
CASHFLOW AND COST SAVINGS
The question for me is how is the trust going to pay for these items without selling off some of its existing assets? Its existing revenue base is approximately $38 Million and would have been hoping that increases in FUM would lead to increased income.
To begin with, Joseph Ferragina forecast expenditure of $15-16 Million in the latest conference call.
This would leave $20 Million in cashflow, however this doesn’t take into account taxes, taking advantage of other investment opportunities, etc. Practically, cashflow should be about $10 Million per annum.
Pacific Current will need to consider stop paying dividends to pay for existing liabilities within nine years. Believe this is what Joe Ferragina meant when the days of 40 cent dividends are over. If we are lucky, dividends will be 5 cents at the most moving forward. This will be for the next ten years at least.
WHAT SHOULD PAC CONSIDER TO CHANGE?
PAC’s board and Aurora Trust need to consider selling Seizert Capital or consider giving back this business to its original owners at cost to fund liabilities (they have this in place for other funds). This will enable the Aurora Trust to generate cash to pay for dividends or invest further into other businesses. US Funds Management industry is very different to Australia and it is very hard for a fund in the US to return back to growth, the industry is ruthless and is dynamically changing to weed out non-performers and funds with high costs (businesses like Seizert Capital). Over its lifecycle Seizert had continued to grow until recently. This business is highly likely to fail over the next few years unless the management of FUM are changed.
Most small funds in the US are Aperio’s size. The other funds from the Northern Lights business can be considered extremely boutique and need to put some significant effort across the board to achieve significant FUM volume growth. The US businesses look ok against Australian businesses because our market is about 20 times less than the US industry. As an example, a business like Investors Mutual in the US would have about $120 Billion of FUM.
Hoping we see more light on future direction and a bit more honesty from the board. Believe a worst case scenario is that PAC will need to raise capital to payback debt, but is unlikely to be able to do so at a high share price. We will see significant dilution before PAC is heading in the right direction.

Believe the above justifies a significant vote against the Remuneration Report and the re-appointment of directors.
Best of Luck
Lost