dorado draft 0602
Post on 21-Jan-2015
563 Views
Preview:
DESCRIPTION
TRANSCRIPT
Dorado Multiplier Fund Ltd
Technical PresentationFebruary 2006
CONFIDENTIAL
Dorado Multiplier Fund Ltd (or The Fund)
is an unlisted public investment company
whose key investment objective is
to generate a fully-franked net dividend yield of over 9% per annum for its investors, paid
quarterly
through the execution of a unique, proprietary investment strategy
Overview
Fund performance since inception
$ %
Issue price per share for the founding investors $1.00
Total net fully-franked cash dividends paidper share from August 2003 to January 2006 $0.274 27.4%[represents a 10.5% annualised fully franked net yield]
Gross amount of franking credits attached tofully-franked dividends paid $0.117 11.7%
Unrealised increase in Fund net asset valueper share as at 24 January 2005 $0.347 34.7%
______ _____
Increase in shareholder wealth $0.738 73.8%(including the value of franking credits)
Increase in shareholder wealth $0.621 62.1%(excluding the value of franking credits)
Fund financial position per share (at 31 Dec 2005)Balance Sheet per share Cost Mark to market
cents per share cents per share
AssetsCash 4.0 4.0 Investments 230.0 261.1 Dividends receivable 0.3 0.3 Receivables 0.0 0.0
234.3 265.3 Liabilities
Interest bearing debt 125.0 125.0 Accrued interest - - Current income tax provision 0.2 0.2 Deferred tax on unrealised gains - 9.3
125.2 134.5
NET ASSETS 109.1 130.8
Shareholders' FundsIssued capital 104.8 104.8 Investment revaluation reserve - 21.7 Retained profit brought forward 10.8 10.8 Current year profit 5.8 5.8 Dividends paid (12.3) (12.3)
109.1 130.8
NTA per share under AIFRS 109.1 130.8
NTA per share before deferred tax provision 140.1
136.1
Underlying NTA per share (excluding fully-franked dividends received/receivable, before deferred tax provision)
Elements
Investment strategy - unique, evidence based and successful, generating high fully-franked yields
Performance-based investment management fees
Transparent, familiar and efficient company investment structure
Investor liquidity mechanisms under development
Investment strategy overview
Conservativefinancialgearing
Efficienttax
structuring
Intelligentportfolio
management
Available evidence strongly supports the view that active fund management does not generate excess returns over the long term
Instead, the Fund’s portfolio management strategy is based on a fundamentally passive approach, modified in order to achieve the Fund’s broader investment objectives
Fama, “EfficientCapital Markets”
(1970)
Bernoulli’sTheorem, “TheLaw of Large
Numbers”
Central LimitTheorem (Chebyshev)
Poterba & Summers,“Mean reversionIn stock returns”
(1988)
Fama & French, "The Cross-Section of
Expected StockReturns," (1992)
Markowitz,“Portfolio Selection”
(1952)
PortfolioManagement
Strategy
The strategy is a distillation of empirical portfolio research, applied using established statistical theorems and techniques
Portfolio management – evidence based
Conservativefinancialgearing
Efficienttax
structuring
Intelligentportfolio
management
Conservativefinancialgearing
Efficienttax
structuring
Intelligentportfolio
management
Conservativefinancialgearing
Efficienttax
structuring
Intelligentportfolio
management
Portfolio characteristics
Applying these principles, the Fund’s portfolio has been constructed so as to exhibit the following characteristics:
The portfolio is highly diversified, and the Fund does not take a view as to expected future price movements of individual stocks in the portfolio
The portfolio has exhibited below-market portfolio risk
The portfolio generates high dividend yields, with high levels of associated franking credits
Minimal portfolio turnover is required to maintain its key characteristics
The portfolio is constituted almost exclusively of S&P/ASX 200 companies
Conservativefinancialgearing
Efficienttax
structuring
Intelligentportfolio
management
Conservativefinancialgearing
Efficienttax
structuring
Intelligentportfolio
management
Conservativefinancialgearing
Efficienttax
structuring
Intelligentportfolio
management
Current portfolio constituentsConservative
financialgearing
Efficienttax
structuring
Intelligentportfolio
management
Conservativefinancialgearing
Efficienttax
structuring
Intelligentportfolio
management
Conservativefinancialgearing
Efficienttax
structuring
Intelligentportfolio
management
AEO AUSTEREO GROUP LTD
ALN ALINTA LTD
ALS ALESCO CORP LTD
ANZ ANZ BANKING GRP LTD
API AUSTRALIAN PHARM INDUSTRIES LTD
AVJ AV JENNINGS LTD
AWB AWB LIMITED B CLASS
BLD BORAL LTD
BSL BLUESCOPE STEEL LTD
CBA COMMONWEALTH BANK LTD
CRG CRANE GROUP LIMITED
CSM CONSOLIDATED MINERALS LTD
DJS DAVID JONES LIMITED
FLT FLIGHT CENTRE LTD
FWD FLEETWOOD CORPORATION LTD
FXJ JOHN FAIRFAX LTD
GUD GUD HOLDINGS LTD
GWT GWA INTERNATIONAL LTD
HIL HILLS INDUSTRIES LTD
IAG INSURANCE AUSTRALIA GROUP LTD
JST JUST GROUP LTD
LNN LION NATHAN LIMITED
MGW MCGUIGAN SIMEON WINES LTD
NAB NATIONAL AUST. BANK LTD
OST ONESTEEL LIMITED
PPC PEET & CO LTD
QAN QANTAS AIRWAYS LTD
RCL REPCO LTD
SBC SOUTHERN CROSS BROAD LTD
SFC SCHAFFER CORP. LTD.
SKE SKILLED ENGINEERING LTD
SPT SPOTLESS GROUP LTD
STO SANTOS LTD
SUN SUNCORP-METWAY. LTD
TAH TABCORP HOLDINGS LTD
TEN TEN NETWORK HOLDINGS LTD
TLS TELSTRA CORPORATION. LTD
WAN WEST AUSTRALIAN NEWS LTD
WES WESFARMERS LIMITED
WYL WATTYL LTD
40 stocks, of which 36 are S&P/ASX 200 constituents Portfolio constituents collectively contribute
approximately 30% weighting of the S&P/ASX 200
As an implicit component of the Investment Strategy, the Fund has adopted a conservative level of financial gearing to enhance long-term returns
The gearing is achieved through ordinary on-balance sheet financial debt
The target gearing ratio (based on debt/portfolio market value) is between 40% and 45% (currently 42%)
The Fund has adopted an active near-term interest rate hedging strategy which will be extended as the Fund grows
Investment strategy – financial gearing
Conservativefinancialgearing
Efficienttax
structuring
Intelligentportfolio
management
Conservativefinancialgearing
Efficienttax
structuring
Intelligentportfolio
management
Conservativefinancialgearing
Efficienttax
structuring
Intelligentportfolio
management
The Dorado Multiplier Fund has adopted a highly efficient tax structure and strategy as an integral component of its investment strategy
The strategy enable an enhanced level of fully franked dividends to be distributed to investors and virtually eliminates the corporation tax incurred by the fund
Notwithstanding its efficiency and uniqueness, the tax strategy is straightforward and is very low risk
Tax structuringConservative
financialgearing
Efficienttax
structuring
Intelligentportfolio
management
Conservativefinancialgearing
Efficienttax
structuring
Intelligentportfolio
management
Conservativefinancialgearing
Efficienttax
structuring
Intelligentportfolio
management
The Fund’s current target is to generate quarterly dividends that represent, at least:
A fully franked net yield of over 9% per annum
which is equivalent to
A gross yield of 12.8% annum
The actual yield will vary according to the yield on the underlying portfolio and other factors
Note that the after-tax yield to investors will depend on each investor’s tax circumstances and capacity to utilise franking credits
Opportunity to introduce dividend reinvestment plan once a retail AFS licence has been obtained (expected by mid 2006)
Investment Strategy objectives – Dividend Yield
The high dividend yield and high level of franking credits makes an investment in the Fund potentially highly attractive to:
Investors seeking to enhance their portfolio investment income
and / or Investors with a low marginal tax rate
Natural investor clienteles include: Self-funded retirees
Self-managed superannuation funds (particularly allocated pensions – note 15% tax rebate for rebatable super pensions)
Spouses with low taxable income
Family trusts
Investment Strategy objectives – Dividend Yield (cont’d)
The Fund seeks to actively manage and moderate the risks associated with equity investments in general and the Investment Strategy in particular
In particular, gearing is a fundamental and integral component of the Strategy, but it inevitably also magnifies investment risks
These risks are managed and moderated by:- The Fund’s diversified, low-risk portfolio management strategy- Adopting a target gearing ratio of between 40% and 45%, well below
the Fund’s facility limits- Adopting a long-term investment horizon, and strongly
recommending that the Fund’s investors do the same
Through these measure, the Fund has been structured so that its underlying net assets per share should exhibit volatility only moderately above overall equity market volatility
Investment Strategy objectives – Risk Management
The Fund’s investment strategy was devised by and is the property of Dorado Capital Pty Ltd
The Fund has engaged Dorado Capital as Manager to execute the investment strategy on its behalf
Dorado Capital’s fees are based on the level of fully-franked dividends that the Fund pays to its shareholders in excess of a yield threshold
Dorado Capital also provides other administrative and company secretarial services to the Fund on a cost-recovery basis
The Manager
A key objective is to keep fees and expenses low and transparent in order to provide excellent value to investors
The Fund charges no outright entry fees to investors introduced by the Manager
The Manager receives a Performance Fee equal to 33% of the annualised fully-franked net dividends paid that exceed a 6% yield
The total ongoing costs (including the Performance Fee) are targeted to be a total 1.4% to 1.5% per annum of the fund’s net asset value (on the basis of a 9% fully-franked yield for the Fund’s investors)
Management fees and expenses
Legal structure
Necessary for effective execution of the Investment Strategy Affords transparency and investor protection
- Majority independent board of directors- Compliance with Corporations Act
Cost efficient Not materially tax disadvantageous (note LIC provisions) Common in the US and Europe
- US mutual funds structured as open-ended companies- European investment trusts / OEICs
Fund established using a company structure, rather than the more common trust structure employed for collective investment vehicles in Australia:
Liquidity Although the an investment in the Fund is fully
transferable, no ready market for shares in the Fund exists at this time
The Fund is investigating seeking a listing on the Newcastle Stock Exchange in order to provide a liquidity mechanism for its shareholders
Genuine liquidity mechanism (trade through established brokers) although no guarantee of liquidity in and of itself
Low cost
Following listing, the Fund’s intention would be to adopt a periodic on-market buyback strategy to ensure that a minimum level of liquidity is available for investors
Maximum of 10% of share capital per annum under Corporations Act on-market buyback restrictions
top related