why do funds underperform the index, page-8

"I prefer to look at pre-tax NTA as the LICs I invest in have no intention to sell down their holdings and incur capital gains tax"


In fact, it does not matter whether those LIC's sell their holdings, as they must do from time to time, mostly due to compulsory acquisitions, eg Rinker etc.

The economic value of those (approved by the ATO traditional) LIC's is the pre-tax NTA regardless of whether they realise Capital Gains or not.

You will have no doubt seen in your dividend statement that a portion of your fully franked dividend is classed as a LIC Capital Gain dividend which entitles you to a tax deduction.

Only few LIC's are allowed to do this. They are members of ALICA which successfully lobbied for the introduction of the LIC Capital Gain dividend when the CGT changed from the indexation to the discount method a few years back. Had they not succeeded they would have been at a disadvantage compared to those entities such as super funds, trusts or individuals who are entitled to CGT discounts whereas companies sre not.


.


.