Details:
1. Tax and Franking Credits add complexity. Some LMIs exploit this
"Pre-tax NTA" is typically reported after realised gains/losses but before unrealised gains/losses
"Post-tax NTA" is typically reported after both realised and unrealised gains/losses with any deferred tax assets (carried losses) also added back
Distributed franking credits are part of past total returns and performance. Undistributed franking credit balances with the ATO are not part of Net Assets and shouldn't be counted in formal NTA figures. It is fair enough to note them though especially if the LIC has a policy of maximising return of them to shareholders by paying a high dividend.
PAF provides a good example of this complexity in the 4 levels of NTA it reported in April 2016:
In 13 May 2016 the NTA report suddenly has a gap in before tax NTA due to franking credits:
Suddenly there is a gap between the "NTA before tax accruals + franking credits" and the "NTA before tax accruals." Did this gap actually emerge in a week or is this because prior reporting was incorrect? Of course, no errors or changes were every mentioned!
Now we know for the frst time that undistributed franking credits are adding 4.2 cents/share to the NTA! (This is not something most LICs do.)
One week later in its 20 May 2016 report why not just drop the less flattering information and obscure the amount due to undistributed franking credits?
After its 30 June 2017 NTA update PAF now reports in the footnote how much it is adding to Pre-tax NTA with undistributed franking credits:
It includes a note 1:<<
1. Includes $0.0351 of franking credits.
>>
As of 22 March 2019 PAF reports that of $1.1244 in Pre-tax NTA $0.064 is undistributed franking credits. This equals 5.7%. PAF's NTA discount on a like-for-like basis with other LICs that don't include franking balances is thus 5.7% bigger than is usually calculated and reported.
