Australian Enhanced Income Fund NAV for December 2011
The Fund’s NAV of a unit at the close of business on 31 December, 2011 was $6.468 per unit. This compares with the NAV of a unit at the close of business on 30 November, 2011 of $6.405 per unit. The change in NAV over the period from 30 November 2011 to the close of business on 31 December 2011 represents a return of 0.98%. This compares with the UBS Bank Bill Index return over the month of +0.39%. After the payment to unit holders registered at the close of business on 31 December 2011 of the $0.125 cash distribution the Fund's NAV of a unit was $6.343.
The franking benefit for December 2011 was estimated to be 0.08%.
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Elstree Enhanced Income Fund January 2012 Performance Review
The Elstree Enhanced Income Fund’s Net Asset Value (NAV) increased over the month of January from $0.7283 to $0.7365 per unit representing a return of +1.13%. This compares with the All Ordinaries Accumulation Index and the UBS All Maturities Bond Index returns of +5.23% and +0.15% respectively.
The Fund’s over the year net return (after fees and before adjusting for franking credits) increased to 2.30% from 2.18% previously.
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Australian Enhanced Income Fund: Change to minimum cash distribution payment
Since the September quarter of 2009 the Australian Enhanced Income Fund (“Fund”) has paid a minimum cash distribution at a rate of $0.50 per annum.
However, recent cuts in official cash rates by the Reserve Bank has reduced the Fund’s ability to pay a minimum cash distribution at the rate of $0.50 per annum without reducing the capital value of the Fund. While we recognize the importance of distributions to unit holders, it is imprudent to pay out income above the Fund’s earnings.
Commencing with the distribution payable at the end of the March 2012 quarter we will reduce the minimum distribution to $0.45 per annum.
The Fund expects to generate franking credits to the value of about $0.10 per annum. This means that the total income return (including franking) will be around $0.55 per annum. At the current Net Asset Value (NAV) of a unit ($6.343) the total (including franking) minimum income return approximates to 8.6%. This is well in excess of bank bill and bank term deposit rates of return.
Should cash rates rise above their current level of 4.25% or if the credit margins on our investments widen, we will consider increasing the minimum cash distribution.
The Fund will continue to distribute all income earned and received. If the income generated by the Fund is above the $0.45 per annum minimum cash level for 2011/2012 financial year and in any subsequent year, the excess income will be distributed to unit holders.