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REPORTING SEASON A key consideration in the construction of our portfolio for the High Income Value Microcap Fund was not only the forecast grossed up yield of the business, but the sustainability of that dividend yield. To create long term value for our investors we need to identify businesses that have a solid business model which can maintain the dividend payment commitments to their shareholders. To sustain a dividend, a company must hold a strong resilient business model that can withstand competitive pressures and often unforeseen challenges, not all business models are equal. Additionally, those businesses that hold genuine growth potential and are consequently able to achieve their forecast growth are logically in a strong position to not only maintain their total dividend commitments but are likely to increase them. Our current High Income Value Microcap Fund held 15 businesses during the reporting period and we are pleased to report the following changes to total dividend payments by the companies; Change in total dividend payment of high Income Value Microcap Fund Portfolio Number of Companies that lowered total dividend payment Number of Companies that maintained total dividend payment Number of Companies that increased total dividend payment
3 4 8
Microequities High Income Value Microcap Fund returned a positive +4.34% versus the All Ordinaries Accumulation Index positive +2.12% in August. Overall the reporting season provided us with confirmation that our 15 owned businesses are well placed to maintain their total dividend commitments. Whilst the forecast dividend yield four our fund has slightly fallen due to price appreciation (capital growth), we still note that still represents a 8.69% premium over the risk free rate of return currently at 3.04%. Current Forecast Grossed Up Dividend Yield of the Fund*: +11.73%
*Forecast Grossed up Yield is based on internal forecasts and actual results may vary. Investors should note that Gross Dividend Yield is not a forecast distribution as distributions will depend on actual dividend income received and actual number of units on issue at the time a distribution is made.
4.0%
1.2%
Cash Software & Services Consumer Durables & Apparel Capital Goods Media
51.9%
Commercial Serv. & Sup. Diversfied Financials Retailing Banks Real Estate
(Returns are calculated after all fees and expenses and reinvestment of distributions. Inception of Fund March 1, 2012) *AOAI: All Ordinaries Accumulation Index. *OP: Outperformance. Past performance is not indicative of future performance.
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MICROEQUITIES ASSET MANAGEMENT |AFSL 287526 |Suite 702, 109 Pitt Street, Sydney NSW 2000 Office: +61 2 9231 6169 Fax: +61 2 9475 1156 invest@microequities.com.au