LICs have a fixed number of shares which are traded on the Australian Stock Exchange. The closed-end nature of the fund enables a focus on long-term portfolio performance without having to deal with funds moving in and out of the portfolio due to changes in investor sentiment. The closed-end structure also removes the motivation to shadow indices and we can therefore take a much longer term approach to our investment horizon. The costs of administering the fund are also reduced as we are not continually issuing and redeeming units in the fund.

This structure also provides Mirrabooka with the ability to pay franked dividends from shares sold which generate after tax profits, and from the interest and franked dividends received on its underlying investments.

We invest in companies that typically have high quality businesses and that are financially sound. It is our view that such businesses generate superior returns over the long-term. This approach has historically produced attractive returns and fully franked dividends over time for shareholders.

We have an experienced investment team that actively reviews current and potential investments, with the view of identifying quality companies with growing businesses. When selecting investments for the portfolio we look for companies with strong industry positions, quality balance sheets, good management and board (particularity if they have a high level of investment in the business), and ability to generate a good level of cash.

In managing the portfolio it is constructed to ensure the top 20 holdings do not dominate the portfolio. Holding positions are built over time following on from an increased level of confidence in the investment, and added particularly through any market weakness when value is on offer. Selling in portfolio arises because there has been an adverse change in the original investment case or when valuations become overstretched.

Investing in this sector can be subject to greater volatility compared with investing in larger companies 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. Consequently, this section of the market requires a significant amount of research and subsequent close monitoring of the portfolio.

In this context, we are willing to move quickly to realise investments when we form a view that an investment is well overvalued or there has been a material adverse change in a company’s circumstances or prospects. As such, we believe it is important to be nimble and responsive to material changes affecting these investments.

The Company typically holds between 50 - 70 stocks depending on their fit with our investment aims and the desired concentration of risk within the portfolio.

Mirrabooka receives dividends from the companies it invests in as well as other income. Dividends paid by the Company are able to be sourced from current year profits, retained profits and profits from the sale of investments. Fully franked dividends are paid twice a year.

Shareholders can choose to reinvest these dividends via the DRP.

When shareholders receive a franked dividend it means they are potentially entitled to a rebate on the tax already paid by the companies Mirrabooka invests in. Franking credits attached to the dividend are sometimes referred to as imputation credits.

Assessment of Environmental, Social and Governance (ESG) issues is an important part of our investment process. As a long-term investor, we seek to invest in companies that have strong governance and risk management processes, which includes consideration of environmental and social risks. We regularly review companies to ensure ongoing alignment with our investment framework.

More details are in the attached document.