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Dorado  Draft 0602
 

Dorado Draft 0602

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Test for Tim and Tony

Test for Tim and Tony

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    Dorado  Draft 0602 Dorado Draft 0602 Presentation Transcript

    •  
    • 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 paid per 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 to fully-franked dividends paid $0.117 11.7% Unrealised increase in Fund net asset value per 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)
    • 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 Conservative financial gearing Efficient tax structuring Intelligent portfolio 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
      • The strategy is a distillation of empirical portfolio research, applied using established statistical theorems and techniques
      Portfolio management – evidence based Fama, “Efficient Capital Markets” (1970) Bernoulli’s Theorem, “The Law of Large Numbers” Central Limit Theorem (Chebyshev) Poterba & Summers, “ Mean reversion In stock returns” (1988) Fama & French, "The Cross-Section of Expected Stock Returns," (1992) Markowitz, “ Portfolio Selection” (1952) Portfolio Management Strategy
    • 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
    • Current portfolio constituents
      • 40 stocks, of which 36 are S&P/ASX 200 constituents
      • Portfolio constituents collectively contribute approximately 30% weighting of the S&P/ASX 200
      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
      • 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
      • 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 structuring
      • 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