All of Mirrabooka’s dividends to date have been fully franked, potentially enabling shareholders to offset the franking credits received against their own income. Recent changes to the imputation system also allow refund of franking credits to shareholders whose marginal tax rate is less than the Company tax rate.
Further, since Mirrabooka meets the definition of a Listed Investment Company for tax purposes, it is also able to pass through to shareholders tax benefits when available in respect of capital gains which the Company makes on securities held more than one year. The effect of these tax benefits is to potentially put the shareholder in the same position as if they had sold these assets personally so that half of the capital gain would be tax free.
The role of the Board of Directors is to set goals and policies for the operation of the Company, to oversee the Company’s management, to regularly review performance and to generally monitor the Company’s affairs in the best interests of its shareholders. For these responsibilities, the Board is accountable to its shareholders.
The Board has been supervising the Company to meet its primary performance aims:
The Board comprises a non-executive Chairman, Managing Director and three non-executive directors, all of whom have a personal financial interest in the Company.
TA Campbell, the Chairman, has been a Director of the Company since it commenced operations in April 1999. Given that Mirrabooka is a Listed Investment Company whose primary activity is investing its capital in listed securities, it is important that the Chairman has a depth of experience and skills in the securities industry and has an involvement in the investment decisions of the Company. The Company and Goldman Sachs JBWere maintain a close relationship. TA Campbell is Senior Chairman, former Chief Executive and a shareholder of Goldman Sachs JBWere. Accordingly, he is not regarded as independent. Given the specialist, straightforward nature of the Company, an independent Chairman is not regarded as necessary.
D Evans was Managing Director of the Equity Products Division of Goldman Sachs JBWere until May 2007 when he became Managing Partner of Evans and Partners Pty Ltd. Evans and Partners Pty Ltd received brokerage for transactions executed during the year of $9,000. He was not involved in the selection of the firm to undertake the work and the Board is of the view that this does not compromise his independence.
D Evans is therefore regarded as an independent Director as are DE Meiklejohn and IA Campbell. Accordingly. the Board consists of a majority of independent Non-Executive Directors.
The directors meet formally as a Board at least 11 times per year. Additional commitment of time is also required for the various Committee activities.
The Investment Committee comprises TA Campbell (Chairman), RE Barker, D Evans and DE Meiklejohn. The Investment Committee reviews all investment orders and transactions, trading portfolio share and option transactions, the performance of investments, sets investment policies, reviews sub-underwriting offers and deals with other portfolio related activities such as voting instructions and lodgement of proxies. The Committee meets regularly (normally fortnightly).
Investing in the small to mid cap sector can be subject to greater volatility compared with investing in larger capitalised companies may because of the reliance these smaller companies have on single markets, products and/or key individuals. From time to time, shares in these smaller companies may also be subject to lower than normal liquidity.
In this context the Company does not seek to avoid risk but to manage it appropriately by having a well diversified portfolio and by ensuring any single investment does not represent a high valuation risk relative to the overall size of the portfolio. The Company is also willing to move quickly to address risk issues and to make changes to the portfolio should there be a material change in a company’s prospects or where investments look significantly overvalued.
Mirrabooka also avoids the more speculative and volatile area of the small to mid cap market as it focuses on companies that provide medium to long term value, including good dividend returns.
The Company’s investment decisions are made by the Investment Team which includes the Managing Director and are reviewed by the Investment Committee, which usually meets fortnightly.
In relation to research functions and day-to-day dealing responsibilities relating to the portfolio, the Board has outsourced these functions to Goldman Sachs JB Were for a fee of 0.5 per cent per annum of the market value of the funds invested in equities. All transactions are subject to review and oversight by the Investment Committee.
In addition, because of the breadth and diversity of this area of the market, a large number of stockbrokers cover specific companies or sectors. This means Mirrabooka also deals with many brokers not just Goldman Sachs JB Were.