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What are listed investment companies?

Listed Investment Companies (LICs) provide exposure to a diversified portfolio of investments on behalf of their investors. LIC’s are like any other company ie. BHP or Woolworths listed on the Australian Securities Exchange (ASX). They have their own separate boards, own governance structures and are required to report their financial results to the market every six months.

LICs are closed-end vehicles, meaning they do not continually issue new shares or cancel shares as investors join and leave the fund. Instead, investors buy and sell to each other through shares listed on the ASX.   

Occasionally, an LIC may issue new shares to increase the size of the portfolio through dividend reinvestment plans, share purchase plans and rights issues. They may also buy back and cancel shares in order to reduce the size of the fund, although this occurs less frequently. These decisions are made at the discretion of the Board. The closed-end structure typically allows the fund manager to concentrate on investment selection without having to factor in the possibility of money coming into or leaving the fund. This capital stability assists Djerriwarrh in taking a long-term approach to investing.

An LIC’s share price can on occasions trade at a different price to the underlying value of portfolio. Because it actually has a set amount of shares on issue, the share price can sometimes trade at a premium, and sometimes at a discount depending on the demand from buyers and sellers within a market.

There are many LIC’s listed on the ASX with different investments styles and objectives. Djerriwarrh seeks to provide shareholders with an enhanced level of fully franked dividends and to provide attractive total returns over the medium to long term.