As I step back from my role and prepare to hand over the reins, I wanted to write to you directly about Mirrabooka — a fund that has given investors something quite special: exposure to the small and mid-cap part of the market, combined with a genuinely attractive income stream along the way.
Before I hand over the leadership reigns to incoming CEO Alison Gibson, I wanted to spend some time explaining one of the features of our structure that I think is often underappreciated, because I believe understanding it helps explain why Mirrabooka has been able to deliver consistently for shareholders, even through difficult periods.
The advantage of being a listed investment company
All four of our funds are structured as listed investment companies, and that structure creates a genuine advantage when it comes to income.
As a company, our profits come from two sources. The first is straightforward: when the companies we invest in pay us dividends, that income is profit, and we can pass it through to you as a dividend. The second is less obvious but just as important: when we sell a stock for a capital gain, that gain is also profit, and because we pay tax on it, we generate a franking credit. That franking credit can then also be distributed to shareholders as part of your dividend.
In other words, we have two distinct ways of generating the income we pay out to you. That's part of why, across all of our funds, dividend yields and the associated franking credits remain genuinely attractive.
For Mirrabooka specifically, it means investors get exposure to the growth potential of small and mid-cap companies, while still receiving an attractive income stream along the way - a combination that isn't always easy to find in that part of the market.
Why this matters in a downturn
There's a further benefit to this structure that I think is worth spelling out clearly, because it's been one of the most valuable features of Mirrabooka over the years I've been involved.
In most years, we pay out a fair share of the capital gains we generate. But we don't pay out all of it; we retain a portion, and it sits within the company. That might seem like a small detail, but it has mattered enormously during periods of market stress.
During downturns like COVID and the Global Financial Crisis, many of the companies we invest in cut their dividends. That naturally reduces the income we receive, and in turn, what we're able to pay out to shareholders. But because we had retained some of those earlier capital gains rather than distributing all of them immediately, we were able to draw on those reserves to top up dividends during those tougher periods.
The result is that, historically, Mirrabooka has been able to sustain ordinary dividends for shareholders even through significant market downturns — at exactly the time when that income matters most to investors.
A reflection as I step away
I wanted to share this with you not because it's a new development, but because I think it's a feature of the fund that deserves to be properly understood and appreciated. It's not a flashy story, but it speaks to a sturdy, sensible approach to managing capital on your behalf, building resilience for the times when it's needed most.
As we transition to new leadership, I remain highly confident that Mirrabooka, led by Portfolio Manager Kieran Kennedy, will continue to offer investors exposure to quality businesses in key growth segments. The structural advantages that have served this company well will remain firmly in place, and the discipline behind how we manage both growth and income will continue.
Thank you for being part of this journey with us. It has been a genuine privilege to be a part of the management of Mirrabooka on your behalf, and I leave knowing the portfolio and the disciplined investment approach behind it are in good shape for the years ahead.