AMCIL Limited

AMCIL Limited (AMH), listed on the Australian Stock Exchange (ASX) since January 1, 2000, is an Australian Listed Investment Company (LIC). With over 23 years of operational experience, AMH primarily focuses on investments in Australian equities, and has a market cap of approximately $300 million. The company's investment portfolio targets a mix of large and mid-cap public companies in Australia and New Zealand.

AMCIL Limited's (AMH) investment objective centers on providing shareholders with robust total returns over the medium to long term. To achieve this, the company maintains a concentrated portfolio, typically consisting of 30 to 40 Australian and New Zealand public companies. The strategic focus lies in capital growth and generating fully franked dividends for its investors.

AMCIL Limited (AMH) specialises in Australian equities, which carry inherent growth and risk characteristics. recognise that AMH itself is a growth/risk asset, affecting your overall asset allocation and investment strategy. The LIC structure allows for profit retention and smoothing of income distribution, creating an income-like experience for investors. However, it's essential to understand that income isn't guaranteed, and market conditions could lead to adjustments in future dividend payments.

With this understanding and acknowledging AMH's status as a risk asset, consider these crucial metrics when evaluating it as an investment option:

• Long-term Performance: Assess AMH's historical performance over an extended period, typically 5 years or more. Has the company consistently delivered after-fee returns that meet or exceed its benchmark, the S&P/ASX 200 Accumulation Index?
• Dividend Reliability: Examine AMH's track record of maintaining or increasing its dividend payments over the long term. This indicator helps gauge the reliability of income generated by your investment.
• Underlying Holdings: Research the specifics of AMH's portfolio, including both large and mid-cap Australian and New Zealand public companies. Review the underlying holdings, which can usually be found in monthly updates or the latest annual report, to ensure alignment with your investment preferences.
• Fees: Assess the cost of investing in AMH by examining its Management Expense Ratio (MER). This ratio divides the total costs of the fund by its net tangible assets. For internally managed LICs, the fee structure may differ. AMH's most recent MER stood at 0.52%, which is on the lower end of the LIC universe

A Listed Investment Company (LIC) is one type of investment fund structure (i.e. shareholder funds pooled together and invested together, either actively by a manager, or passively). Other types of investment funds include Exchange Traded Funds (ETFs) (which can be both actively managed or passive), Listed Investment Trusts, or Managed Funds.

The different structures have their own positives and negatives, which are dependent on the goals of the investor and their own individual investment structure.

Some of the benefits of the LIC structure (the structure of AMH) include:

• It's a closed-end investment vehicle: Meaning the manager has a fixed pool of capital to invest with a long-term mindset, and doesn't have the risk of fast redemptions by investors in a time of market panic.
• They can smoothen out income to the investors: Which can be beneficial for both tax efficiency and emotional mindset, due to being able to retain profits over time (as compared to the trust structure, which must distribute income and crystallized capital gains to the investor in that financial year).
• The income will most likely be in the form of fully franked dividends: Which is an attractive form for Australian retirees due to the franking system in Australia. Since LICs are companies themselves and pay tax in Australia on profits, they receive franking credits paid on the tax they pay, in addition to the franking credits they receive from their investment portfolio. Well-managed LICs ensure their franking credit reserves are sufficient to pay future fully franked dividends (see 'franking reserves' chart above).