listed investment companies (lics) · a 1:1 option with a march 2017 expiry date has been included...

BAILLIEU HOLST RESEARCH

3 June 2015

Baillieu Holst Ltd ABN 74 006 519 393 www.baillieuholst.com.au Please read the disclaimer at the end of this report.

CONTENTS Page

Argo Global Listed Infrastructure Ltd 2

International Comparison Table 3

TSR and NTA Performance 3

1 Year Total Shareholder Returns 4

1 Year NTA Growth 4

April Premium/Discount for selected LICs 5

Management Expense Ratios 5

Global Indices 1 Year Performance 6

AMP Capital China Growth Fund (AGF) 7

Asian Master Fund (AUF) 8

Aurora Global Income (AIB) 9

Ellerston Capital (EGI) 10

Emerging Markets Master Fund (EMF) 11

Global Masters Fund (GFL) 12

Global Value Fund (GVF) 13

Hunter Hall Global (HHV) 14

Magellan Flagship Fund (MFF) 15

Platinum Capital 16

PM Capital Asian Opportunities Fund (PAF) 17

PM Capital Global Opportunities Fund (PGF) 18

Templeton Global Growth 19

RESEARCH ANALYST

Piers Flanagan

+ 613 9282 8127Australian

[email protected]

Josh Kannourakis

+ 613 9602 9265Australian

[email protected]

Disclosure

The author owns no shares in any of the

mentioned companies

Listed Investment Companies (LICs) SECTOR REPORT

International LIC sector

Update: The international sector has significantly outperformed the domestic sector with average Total Shareholder Return (TSR) of 29.0% and 4.8% respectively over the prior 12 months ending 30 April 2015. These returns have been predominantly improved by regional exposures and the AUD depreciation relative to the major global currencies (i.e. USD, GBP). For the year ending 30 April 2015, the AUD depreciated 14.9% and 6.5% against the USD and GBP respectively. The increase in demand for greater diversification and the rise in Self-Managed Superfunds (SMSFs) has led to a number of new international LIC offerings over the past 12 months. In May 2015, Argo Investments lodged a prospectus for a new global infrastructure LIC to be managed by Cohen and Steers. On 1 June 2015 Templeton Global Growth (TGG) announced a 1 for 4 pro-rata renounceable entitlement offer to raise up to $64.7 million at an offer price of $1.30 (7.8% discount to the closing price on 3 June 2015). These new offerings provide further diversification opportunities for investors looking to increase geographical exposure and asset allocation.

Top Picks: We have previously advocated Magellan Flagship Fund (MFF) and Templeton Global Growth (TGG) as our top picks within the international space and we continue to look favourably upon these two international LICs. Currently PM Capital Global Opportunities Fund (PGF) provides investors with a unique value proposition trading at an estimated 18.4% discount to NTA. PGF has ~150 million in-the-money options with a 30 June 2015 expiry date. Assuming the outstanding options are exercised we estimate PGF to be trading at a 9.1% discount to NTA. The options trade under the code PGFO and offer investors an attractive opportunity to enter PGF at a discount to NTA. Post the expiry of the outstanding options we believe the discount to NTA gap will decrease and the stock price to move in-line with the performance of the underlying fund. For the year ending 30 April 2015 NTA performance was 29.5%.

International LICs: The average discount to NTA of international LICs is slightly higher than the average of the domestic sector and this can be attributed to a number of factors. 1) Due to the offshore earnings of many of the underlying companies, dividends are often unfranked or only partially franked resulting in a lower dividend yield. 2) MER fees on average are significantly higher than that of the traditional domestic LICs (i.e. MER of AMP Capital China Growth Fund 1.65%). 3) Transparency and knowledge of the underlying portfolio is often lower than that of domestic securities.

Value Opportunity: We believe on average the discount to NTA of international LICs should reduce over the medium term providing current value opportunities for investors. We expect this to be driven by increased investor awareness and the continued strong relative performance of the sector. The 1 year NTA performance on average for the international sector has significantly outperformed the domestic market (31.5% vs 6.8%). This outperformance demonstrates the potential benefits to investors of geographicdiversification.

Top Performers: Please refer to page 3 for a comparison table of International LICs listed on the ASX. The table also provides key metric comparisons to our coverage list of domestic LICs.


3 June 2015


Important dates

Offer opens 20‐May‐15

Offer closes 19‐Jun‐15

Expected date of allotment of

Shares and Options29‐Jun‐15

Trading of Share and Options

commences on the ASX3‐Jul‐15

Expiry date for Options31‐Mar‐17

Argo Global Listed Infrastructure Limited (AGLI) On 31 March 2015 Argo Investments (ARG) announced to the market their intention to launch a global infrastructure LIC, citing the increase demand for diversification and the necessity of infrastructure as the key drivers behind the decision. The AGLI prospectus was lodged with ASIC on 11 May 2015. ARG has appointed Cohen and Steers Capital Management, one of the world’s largest investment managers in global infrastructure as the Portfolio Manager (PM). Argo Service Company (ASCO), a wholly owned subsidiary of Argo Investments, will manage the new fund under the guidance of an Argo board. The decision to focus on Infrastructure emanates from the essential nature of infrastructure sub-sectors such as utilities and transportation. AGLI have defined an infrastructure company that derives at least 70% of its revenues from, or has at least 70% of its assets committed to, the construction, development or financing of infrastructure assets1. The investment objective of ALGI will be to provide both long-term capital appreciation and a dividend income. AGLI has selected 90% of the FTSE Global Core Infrastructure 50/50 Index (AUD) and 10% of the BofA Merrill Lynch Fixed Rate Preferred Securities Index (AUD) as its benchmark and seeks to provide investors will a return in excess of this benchmark. Portfolio Construction: ALGI will typically hold between 50-100 securities with 80%-100% of the portfolio invested in global listed infrastructure securities and 0%-20% of the portfolio invested in global infrastructure fixed income securities. AGLI will invest in both developed and emerging markets.

About the offer

AGLI is seeking to raise up to $500 million at a $2 issue price

A 1:1 option with a March 2017 expiry date has been included

Minimum subscription of $2000

1.2% MER up to $500 million

Priority allocation for existing ARG shareholders

Offer closes 19 June 2015 We look favourably upon the offer and the decision to utilise a global expert portfolio manager within the global infrastructure space given the lack of prior performance data. The 1:1 option will help alleviate investor concerns regarding trading levels on the first day of trading. The MER of 1.2% up to $500 million whilst high, also incorporates the management expense to be paid to Cohen and Steers which is stated as ~50% of the MER. Investors will look favourably upon the income component of the dual investment objective however we do note international infrastructure dividend yields on comparison with domestic infrastructure companies are typically lower. This factor coupled with the low franking credits available on international investments mean investors should not anticipate the dividend yield of AGLI to compete with the yield of Australian infrastructure stocks (i.e. Transurban Group 3.7% and Sydney Airport 4.3%). An analysis of dividend yields across global infrastructure companies is estimated to be 3.50% unfranked2. This compares to the average gross dividend yield of the Australian share market of 4.30%.

1 Source: Argo Global Listed Infrastructure Limited prospectus. 2 Source: Bloomberg, S&P Global Infrastructure Index.


3 June 2015


FIG.1: COMPARISON TABLE OF INTERNATIONAL LICS

International CodeShare Price

Mkt Cap. ($m)

Dividend Div Yield

(%)GrossYield

AprilNTA

April Prem/Disc

Current Est. NTA

Current Est. Prem/Disc

1 Yr Avg Prem/Disc

MER

Amp Capital China AGF 1.79 686.3 3.9 2.2% 2.2% 2.04 -26.5% 2.24 -20.1% -21.2% 1.65%

Aurora Glb Trust AIB 0.85 6.4 8.8 10.3% 10.3% 0.85 -2.4% n.a n.a -1.5% 1.33%

Asian Masters Fund AUF 1.53 190.5 2.0 1.3% 1.9% 1.43 -0.7% n.a n.a -0.1% 1.00%

Ellerston Global Inv EGI 1.20 90.3 0.0 0.0% 0.0% 1.10 5.4% n.a n.a 7.6% 0.75%

Emerging Master Fund EMF 2.07 175.4 6.0 2.9% 4.1% 2.00 2.0% n.a n.a 1.9% 1.08%

Global Masters Fund GFL 1.60 13.7 0.0 0.0% 0.0% 1.68 -3.5% n.a n.a -13.3% 0.00%

Global Value Fnd Ltd GVF 1.06 69.0 0.0 0.0% 0.0% 1.12 -7.1% n.a n.a -1.6% 1.50%

Hunter Hall Global HHV 1.19 286.8 7.0 5.9% 8.4% 1.33 -9.1% 1.46 -18.5% -10.4% 1.50%

Magellan Flagship MFF 1.80 821.7 2.0 1.1% 1.6% 1.96 -10.8% 2.00 -10.3% -6.3% 1.25%

Pm Capital Asian Ops PAF 0.94 51.8 0.0 0.0% 0.0% 1.10 -13.0% 1.13 -16.8% -7.4% 1.00%

Pm Capital Fund PGF 1.06 210.0 0.0 0.0% 0.0% 1.23 -14.1% 1.30 -18.5% -8.3% 1.00%

Platinum Capital Ltd PMC 1.84 429.3 10.0 5.4% 7.8% 1.70 4.2% 1.77 4.0% 9.7% 1.50%

Templeton Global TGG 1.41 281.0 3.5 2.5% 3.5% 1.58 -8.5% 1.64 -13.9% -3.5% 1.00%

International Average 2.4% -6.5% 1.12%

Domestic Average 4.7% -5.1%

Source: Bloomberg, IRESS, Baillieu Holst estimates

FIG.2: TSR AND NTA PERFORMANCE

Company Code 1 Year TSR 3 Year TSR 5 Year TSR 1 Year 3 Year 5 Year

Amp Capital China AGF 126.9% 34.2% 17.6% 152.9% 33.9% 16.9%

Aurora Glb Trust AIB 2.0% 1.7% n.a 3.8% 2.4% 2.7%

Asian Masters Fund AUF 40.2% 18.2% 8.6% 46.5% 19.0% 9.0%

Ellerston Global Inv EGI 14.9% n.a n.a 13.1% n.a n.a

Emerging Master Fund EMF 31.3% n.a n.a 34.6% n.a n.a

Global Masters Fund GFL 27.6% 39.2% 14.0% 16.4% 24.1% 12.0%

Global Value Fnd Ltd GVF 3.5% n.a n.a 14.6% n.a n.a

Hunter Hall Global HHV 27.0% 22.4% 13.7% 20.6% 18.0% 8.4%

Magellan Flagship MFF 24.7% 32.0% 23.3% 40.0% 28.0% 20.3%

Pm Capital Asian Ops PAF 3.8% n.a n.a 14.1% n.a n.a

Pm Capital Fund PGF 8.8% n.a n.a 29.5% n.a n.a

Platinum Capital Ltd PMC 13.1% 24.7% 8.2% 15.8% 19.3% 8.1%

Templeton Global TGG 21.6% 32.6% 16.9% 17.5% 23.3% 11.4%

3 and 5 year figures are calculated on an annualised basis

EGI, PAF & GVF 1 Year figures from respective inception dates

NTA GrowthTotal Shareholder Return



3 June 2015


FIG.3: TSR (1 YEAR) VS AVERAGE

0%

20%

40%

60%

80%

100%

120%

140%

160%

AGF PAF GVF GFL HHV AIB EGI PMC MFF EMF PGF AUF TGG

Avg International 1 Yr TSR Avg Domestic 1 Yr TSR


FIG.4: NTA GROWTH (1 YEAR) VS AVERAGE

0%

20%

40%

60%

80%

100%

120%

140%

160%

AGF AUF MFF EMF PGF TGG GFL PMC HHV GVF PAF EGI AIB

Avg 1 YR International NTA Growth Avg 1 Yr Domestic NTA Growth


Domestic average 6.8%

Domestic average 4.8%

Average 29.0%

Average 31.4%


3 June 2015


FIG.5: APRIL PREMIUM/DISCOUNT FOR SELECTED INTERNATIONAL LICS

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

AGF PGF PAF MFF HHV GVF TGG GFL AIB AUF EMF PMC EGI

International Avg Trading Discount Domestic Avg Trading Level


FIG.6: MER FOR SELECTED INTERNATIONAL LICS

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

AGF GVF HHV PMC AIB MFF EMF AUF PAF PGF TGG EGI


FIG.7: PERFORMANCE FEES FOR SELECTED INTERNATIONAL LICS

Company Performance Fee

AGF 20% above S&P/CITIC300 TRI

AIB None

AUF 15% of the out-performance of the Portfolio above the benchmark of 10% p.a

EGI 15% outperformance in excess of MSCI World Index (Local)

EMF None

GFL None

GVF 15% outperformance in excess of a hurdle return being 4% above the 1 year swap rate

HHV 15% above MSCI World Index

MFF 10% if returns exceed MSCI World Incdex and 10-year bond rate

PAF 15% of performance in excess of MSCI Asian (ex-Japan) Index (AUD)

PGF 15% of performance in excess of MSCI World Index (AUD)

PMC 10% of returns above MSCI World Index +5%

TGG None


Average 1.12%

Domestic Average -5.1%

Average -6.4%


3 June 2015


‐20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

160.0%

180.0%

April‐14 May‐14 June‐14 July‐14 August‐14 September‐14 October‐14 November‐14 December‐14 January‐15 February‐15 March‐15 April‐15

MSCI World

MSCI Europe

USA S&P500

MSCI Asia ex‐Japan

MSCI Emerging Markets Asia

S&P/CITIC300

ASX All Ords Accum

FIG.8: INDEX PERFORMANCE BY REGION



3 June 2015


0% 10% 20% 30% 40%

Financials

Industrials

Consumer…

IT

Healthcare

Materials

Consumer Staples

Utilities

Telcos

Cash

Metrics

Asset allocation

Top holdings

$0.65 - $1.88

Price (30 April 15) 1.50Share price range (12 months)

Shares on issue 383.4Market capitalisation ($m) 575.1Pre-tax asset backing* 2.04Post-tax asset backing* n.aPremium/(Discount) to pre-tax NTA -26.5%Premium/(Discount) to post-tax NTA

Franking 0%Management expense ratio 1.65%

n.aDividend yield 2.59%Dividend per share 3.9

Ping An Insurance 4.7%CITIC Securities 3.7%Haitong Securities 3.4%China Minsheng Banking Corp. 2.8%China Merchants Bank 2.8%Poly Real Estate Group 2.8%China CNR Corp 2.6%Industrial Bank Co 2.3%Shanghai Pudong Development B 2.1%Jiangsu Hengrui Medicine 2.0%

AMP Capital China Growth Fund (AGF) www.ampcapital.com.au About AGF provides Australian investors the opportunity to access the China A share market, an exchange that only domestic Chinese investors and holders of a Qualified Foreign Institutional Investor Licence are permitted to participate in. AGF is sub-advised by UBS Global Asset Management as well as China Life Insurance Asset Management. Investment Objective The investment objective of AGF is to achieve long term capital growth by investing in China securities, focusing on the China A share market (shares listed on China’s Shanghai or Shenzen stock exchanges). AGF will also seek to outperform the China A S&P/CITIC 300 Total Return Index ($AUD adjusted). AGF will utilise a combined investment style, incorporating both a top-down approach as well as a fundamental bottom-up approach. Investment Guidelines AGF is expected to hold between 30 to 80 China A securities with the ability to hold up to 30% of the fund assets in bonds. AGF criteria;

Hold a maximum position of 10% of the fund in any individual security

A maximum of share deviation of 5% from the benchmark

A maximum sector deviation of 10% from the benchmark

Expected annual turnover of approximately 50%, although this will be dependent on market conditions

AGF Performance Total shareholder return for the year ending 30 April 2015 was 126.9% with pre-tax net asset backing increasing 152.9%.

FIG.9: AGF vs MSCI World Index ($AUD adjusted)

‐20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

160.0%

180.0%

MSCI $AUD Adjusted AGF

Source: Bloomberg, Company Presentations, IRESS


3 June 2015


‐10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

MSCI $AUD Adjusted AUF

0% 20% 40%

China

India

Korea

Taiwan

Hong Kong

Cash

Other

Philippines

Singapore

Thailand

0% 10% 20%

Consumer Staples

Consumer Disc.

Financials

IT

Industrials

Healthcare

Telcos

Materials

Utilities

Energy

Cash

Metrics

Asset allocation

Regional exposure

$0.99 - $1.49

Dividend yield

Dividend per share

Franking

Management expense ratio

1.42

1.00%

Shares on issue (m)

Market capitalisation ($m)

Pre-tax asset backing*

Post-tax asset backing*

Premium/(Discount) to pre-tax NTA

Premium/(Discount) to post-tax NTA

2.0

0%

Price (30 April 15)

Share price range (12 months)

124.5

-0.7%

10.9%

1.41%

189.2

1.43

1.28

Asian Master Fund (AUF)

www.asianmastersfund.com.au/

About AUF incorporates a fund-of-funds investment style, where the underlying portfolio consists of a number of Asian managed funds that adhere to the investment criteria of AUF. The key Asian equity markets consist of China, India, Hong Kong, Malaysia, Indonesia, Philippines, Thailand, Taiwan and South Korea. Investment objective The investment objective of AUF is to achieve a real high rate of return on invested capital within risk parameters and to preserve the investment capital of the company. Investment Guidelines

Company mandate to invest predominately in Asian stocks

Funds must have at least five years track record

Short selling and currency hedging is allowed

No more than 5% of NAV in countries outside key Asian equity markets

No more than 25% of NAV in one single fund

Country allocation is limited to no more than 40%

Underlying funds must meet all investment criteria

AUF Performance Total shareholder return for the year ending 30 April 2015 was 40.2% with pre-tax net asset backing increasing 46.5%.

FIG.10: AUF vs MSCI World Index ($AUD adjusted)



3 June 2015


‐15.0%

‐10.0%

‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

MSCI $AUD Adjusted AIB

$0.82 - $0.91

Management expense ratio 1.33%

Dividend yield 10.57%Dividend per share 8.8Franking 0%

Post-tax asset backing* n.aPremium/(Discount) to pre-tax NTA -2.4%Premium/(Discount) to post-tax NTA n.a

Shares on issue (m) 7.48Market capitalisation ($m) 6.36Pre-tax asset backing* 0.85

Price (30 April 15) $0.83


Metrics

Aurora Global Income (AIB) www.aurorafunds.com.au About Evolving from the AIB buy-write infrastructure income strategy in 2007, AIB was launched in July 2014. The trust focuses on absolute returns using derivative products (i.e. options) to limit both currency and market exposure.

Investment Objective The investment objective of AIB is to provide investors with an income return whilst seeking to preserve the capital of the trust over both rising and falling equity markets. The investment strategy of AIB will utilise fundamental and quantitative analysis, potential mergers and acquisition targets, upgrades prior to earning announcements, demergers and restructuring, liquidity events and recapitalisations. AIB will aim to pay a distribution of at least 2.5% of NAV per quarter. Investment Guidelines

Overall equity market exposure is expected to vary between +/- 25% of net assets.

AIB may invest in equities listed on any global stock exchange

Derivatives may be used for risk management, direct entry into position and volatility trading.

Option time decay for a one month period must not exceed 5% of the portfolio value.

No long position can exceed 12% of NAV (on a cost base)

No short position can exceed 12% of NAV (on a cost base). Risk Management AIB will use options to limit downside risk and well as selling futures contracts to help limit market exposure. Price and stop losses will be implemented to ensure exposures can be liquidated.

AIB Performance Total shareholder return for the year ending 30 April 2015 was 2.0% with pre-tax net asset backing increasing 3.8%.

FIG.11: AIB vs MSCI World Index ($AUD adjusted)



3 June 2015


0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

MSCI AUD Adjusted EGI

Company Country

Vivendi SA France

Synchrony Financial USA

Elis SA France

Experian United Kingdom

Nielsen USA

$1.00 - $1.25

Franking 0%


Premium/(Discount) to post-tax NTA 7.4%

Dividend yield 0.00%Dividend per share 0.0

Pre-tax asset backing* 1.10Post-tax asset backing* 1.08Premium/(Discount) to pre-tax NTA 5.5%

Share price range (since inception)

Shares on issue (m) 75.0Market capitalisation ($m) 87.0

Price (30 April 15) 1.16

0% 20% 40% 60%

USA

Europe

United Kingdom

Australia

Top holdings

Metrics

Regional exposure

Ellerston Capital (EGI) www.ellerstoncapital.com About Launched in October 2014 EGI’s investment objective is to provide investors with a concentrated high conviction global portfolio of 10-25 holdings seeking long term capital appreciation. EGI will be benchmark unaware and assume a bottom-up stock selection process seeking temporarily misunderstood and fundamentally mispriced securities. Investment Objective EGI seeks to generate superior returns with a focus on risk management and capital preservation. Investment Guidelines EGI will utilise a range of asset classes including; listed equities, Australian and international government and corporate bonds as well as derivatives and foreign currency hedging strategies. EGI intends to pay semi-annual dividends, however due to the high concentration nature of the portfolio and focus on capital growth there may be periods where dividend payment will be low or not paid at all. This investment strategy will overlay management’s top-down assessment on the global macroeconomic conditions. EGI will target the following guidelines;

International exposure 50%-100%

Domestic exposure 0%-20%

International unlisted exposure 0%-10%

Australian unlisted exposures 0%-5%

Cash 0%-50%

EGI may be 100% hedged

EGI Performance Total shareholder return since inception was 14.9% with pre-tax net asset backing increasing 13.1%

FIG.12: EGI vs MSCI World Index ($AUD adjusted)



3 June 2015


‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

MSCI $AUD Adjusted EMF

$1.58 - $2.11

1.08%

2.0%

n.a

2.94%

6.0

0%Management expense ratio

2.04

84.72

177.9

2.0

n.a

Price (30 April 15)


Shares on issue

Market capitalisation

Pre-tax asset backing*


Premium/(Discount) to pre-tax NTA

Premium/(Discount) to post-tax NTA

Dividend yield

Dividend per share

Franking

0% 10% 20% 30%

China

India

Other

Frontier

Cash

Brazil

Mexico

South Africa

Russia

0% 10% 20%

Financials

Consumer Staples

Consumer…

I.T

Industrials

Materials

Telcos

Healthcare

Energy

Utilities

Cash

Metrics

Asset allocation

Regional exposure

Emerging Markets Master Fund (EMF) www.emergingmarketsmastersfund.com.au/ About EMF incorporates a flow-of-funds style of investment focusing on core countries such as China, Brail, Russia, India, Mexico and South Africa with the ability to invest up to 20% of its total assets directly into the market. Investment Objective The investment objective of EMF is to provide attractive returns through a combination of long term capital growth and consistent stream of dividends. Investment Guidelines EMF has categorised regional exposure into three sub-sectors, Core countries, Satellite countries and Frontier countries. Investment guidelines emanate from these sub-sectors.

Core Countries: Fund will consistently have exposure to, China, Brazil, Russia, India, Mexico and South Africa.

Satellite Countries: The fund may hold countries within this classification however they are not mandated to.

Frontier Countries: The maximum weighting of all frontier countries must not be greater than 20% of the fund.

No more than 30% of gross value of the portfolio will be invested in any single underlying fund

No more than 35% of the gross value of the portfolio will be invested directly/indirectly in any single country

The fund can borrow up to 10% of the value of total assets EMF Performance Total shareholder return for the year ending 30 April 2015 was 31.3% with pre-tax net asset backing increasing 34.6%%.

Fig.13: EMF vs MSCI World Index ($AUD adjusted)



3 June 2015


Metrics

‐10.0%

‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

MSCI $AUD Adjusted GFL

$1.16 - $1.70

1.62Price (30 April 15)



Dividend yield


0.00%Dividend per share 0.0Franking 0%

n.aPremium/(Discount) to pre-tax NTA -3.5%Premium/(Discount) to post-tax NTA n.a

8.58Market capitalisation ($m) 13.73Pre-tax asset backing* 1.68

Shares on issue (m)

Berkshire Hathaway

Australian Listed Shares

Athelney Trust

Cash

*GFL does not disclose allocation weights

Portfolio construction

Global Masters Fund (GFL) www.globalmastersfund.com.au About GFL offers a unique opportunity by investing a majority of its underlying fund in Warren Buffet’s Berkshire Hathaway Inc. GFL will also alleviate discount trading levels by giving investors the opportunity to sell their shares back to GFL at a price representing net asset value (less a 5% administration cost). Investment Objective The investment objective of GFL is to provide investors with long term capital appreciation through investment in quality global assets. The specific objective is to increase the value of each share at a long term average compound growth rate of at least 12%. Investment Guidelines GFL will invest in the developed stock markets with a 3-5 year capital growth objective. A majority of the fund will be invested in Berkshire Hathaway and will use the diversification of the underlying companies in Berkshire Hathaway as a form of currency hedging. GFL will distribute at least 50% of after tax income to shareholders as dividends. This distribution will be generated though the active management of the portfolio, outside of the Berkshire Hathaway holding. GVF Performance Total shareholder return since inception was 27.6% with pre-tax net asset backing increasing 16.4%.

Fig.14: GFL vs MSCI World Index ($AUD adjusted)



3 June 2015


‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

MSCI $AUD Adjusted GVF

0% 10% 20% 30% 40%

USA

Europe

Australia

United Kingdom

China

Vietnam

Other

Metrics

Asset allocation

Regional exposure

0% 25% 50%

Listed Equity

Fixed Income

Hedge Fund

Real Estate

Cash

Other

Private Equity

$0.97 - $1.11


Premium/(Discount) to pre-tax NTA -7.1%Premium/(Discount) to post-tax NTA -3.8%

Shares on issue 65.1Market capitalisation ($m) 68.99Pre-tax asset backing* 1.12



Post-tax asset backing* 1.09

Global Value Fund (GVF) www.globalvaluefund.com.au/ About The investment strategy of GVF seeks to capture the discount when a security is trading below its underlying assets. The strategy consists of proactively engaging LICs boards, management and other shareholders to decrease the discount gap and increase the share price. Investment Objective The investment objective of GVF is to provide investors with substantial returns across an investment cycle with lower realised volatility than a comparable international equity portfolio. Investment Guidelines GVF will predominately invest in Closed End Funds (i.e. LICs) with the underlying funds incorporating a number of asset classes. Stock selection will be derived from internal and external sources including proprietary systems and an analysis of the CEF. The analysis will focus on the feasibility of closing the discount gap. The CEFs will predominately be listed on developed stock exchanges; however underlying assets will be geographically diversified. GVF Performance Total shareholder return since inception was 3.5% with pre-tax net asset backing increasing 14.6%.

Fig.15: GVF vs MSCI World Index ($AUD adjusted)



3 June 2015


‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

MSCI $AUD Adjusted HHV

Metrics

Asset allocation

Regional exposure

0% 10% 20% 30% 40%

USA

Australia/NZ

Other

Asia

Europe

0% 10% 20% 30%

Consumer…

Healthcare

I.T

Financial

Other

Telecom

Materials

Industrial

Utilities

$0.99 - $1.43

Market capitalisation ($m) 286.8Pre-tax asset backing* 1.33Post-tax asset backing* 1.38


Shares on issue 241.0

Dividend per share 7.0Franking 100%

Premium/(Discount) to pre-tax NTA -9.0%Premium/(Discount) to post-tax NTA -12.0%Dividend yield 5.79%


Hunter Hall Global (HHV) www.hunterhall.com.au/ About HHV has a long term growth profile utilising a buy and hold strategy. HHV seeks to buy securities that are currently trading at a large discount to intrinsic value and securities which display HHV’s analytical investment style. HHV will hold a highly concentrated portfolio, holding less than 40 stocks and will endeavour to distribute 100% of available franking credits. Investment Objective The investment objective of HHV is to achieve substantial growth in the value of each individual shareholding. Investment Guidelines When assessing the viability of companies HHV will target companies that display the following analytical criteria;

Strategic value offering

Discount to asset backing

High dividend yield

Strong balance sheets

Management committed to increasing earnings per share

Takeover targets HHV Performance Total shareholder return for the year ending 30 April 2015 was 27.0% with pre-tax net asset backing increasing 20.6%.

Fig.16: HHV vs MSCI World Index ($AUD adjusted)



3 June 2015


‐10.0%

‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

MSCI $AUD Adjusted MFF

Company Weight

Visa 12.5%

Wells Fargo 11.3%

Lowe's 10.9%

Master Card 10.3%

Home Depot 10.1%

HCA Holding 8.7%

Bank of America 8.2%

US Bancorp 5.9%

Lloyds Banking 5.3%

BlackRock 4.0%

Top holdings

Metrics

$1.36 - $1.95Share price range (12 months)

Shares on issue 457.8Market capitalisation ($m) 819.4


Premium/(Discount) to post-tax NTA 0.0%Dividend yield 1.14%Dividend per share 2.0

Pre-tax asset backing* 1.96Post-tax asset backing* 1.75Premium/(Discount) to pre-tax NTA -10.8%

Franking 0.0%Management expense ratio 1.25%

Magellan Flagship Fund (MFF) www.magellangroup.com.au/mff/ About MFF operates under Magellan Asset Management with the fund focused on North American companies with a majority of the portfolio consisting of multinationals that are leaders in both developed and emerging markets. Investment Objective The investment objective of MFF is to maximise compound risk-adjusted after-tax returns for shareholders by identifying and investing in domestic and international companies that display highly attractive business attributions at a discount to intrinsic value while protecting the capital of shareholders. Investment Guidelines MFF will hold a high conviction portfolio with management investing in 20-100 stocks that they believe offer significant value prospects. Investments will focus on the following key areas:

Banks and general financials

Food and beverages

Retailers

Personal and household goods

Support services

Ports, tolls, roads and vital infrastructure

Monopoly and duopoly systems MFF will focus on countries with a well-established legal and regulatory system to ensure protection of capital.

MFF Performance Total shareholder return for the year ending 30 April 2015 was 24.7% with pre-tax net asset backing increasing 40.0%.

Fig.17: MFF vs MSCI World Index ($AUD adjusted)



3 June 2015


‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

MSCI $AUD Adjusted PMC

0% 10% 20% 30%

Information…

Financials

Consumer…

Industrials

Health Care

Consumer Staples

Materials

Utilities

Energy

Telecom Services

Other

0% 20% 40% 60%

Asia

US

Other

Europe

UK

Metrics

Asset allocation

Regional exposure

$1.66 - $1.98


Shares on issue


Dividend yield



1.6052Premium/(Discount) to pre-tax NTA 4.2%Premium/(Discount) to post-tax NTA 10.6%



Platinum Capital (PMC) www.platinum.com.au About Platinum Capital is owned by Platinum Asset Management, an Australian fund manager that specialises in international equities. Platinum Asset Management currently has ~$25 billion in funds under management. Investment objective The investment objective of PMC is to provide capital growth for shareholders. PMC seek absolute returns and not returns relative to any benchmark. Investment Guidelines PMC will utilise a fundamental bottom-up analysis stock selection process and therefore will not have any fixed portfolio weights to set regions, country or sector allocation. While PMC invests in a diversified global portfolio, Asia remains a key focus with over 50% of PMC’s underlying portfolio in Asian Securities. Asia, and in particular China, will remain a key focus for PMC going forward. PMC Performance Total shareholder return for the year ending 30 April 2015 was 13.1% with pre-tax net asset backing increasing 15.8%.

Fig.18: PMC vs MSCI World Index ($AUD adjusted)



3 June 2015


‐10.0%

‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

MSCI $AUD Adjusted PAF

0% 10% 20% 30% 40% 50%

Hong Kong

USA

Australia

Malaysia

Korea

0% 10% 20% 30% 40%

ConsumerDiscretionary

Cash

I.T

Industrials

Healthcare

Other

Financials

Materials

Metrics

Asset allocation

Regional exposure

$0.89 - $1.01


Dividend yield

Management expense ratio

Premium/(Discount) to post-tax NTA -10.9%



Shares on issue


1.00%


1.078Premium/(Discount) to pre-tax NTA -13.0%

PM Capital Asian Opportunities Fund (PAF) www.pmcapital.com.au/ About PAF offers investors a high conviction portfolio with exposure to the Asian region (ex-Japan). PAF seeks to provide investors with long term capital growth with a 7 years plus investment time frame. Due to the nature of the investment objective dividends distributions are likely to be low. Investment Objective The investment objective of PAF is to provide investors with a concentrated, actively managed portfolio seeking to increase the value of the portfolio by providing long term capital growth. Investment Guidelines PAF will seek to invest in a number of key industries including;

Internet service providers

Consumer discretionary

Non-discretionary retail

Infrastructure – unregulated businesses that command a monopoly

Gaming Risk Management Guidelines

PAF will hold between 5-35 equities

Individual holdings cannot be greater than 10% of NAV

Individual short positions cannot exceed 3% of NAV

PAF Performance Total shareholder return for the year ending 30 April 2015 was 3.8% with pre-tax net asset backing increasing 14.1%.

Fig.19: PAF vs MSCI World Index ($AUD adjusted)



3 June 2015


‐10.0%

‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

MSCI $AUD Adjusted PGF

0% 20% 40% 60%

USA

Europe

UK

Australia

Asia (ex-Japan)

-20% 0% 20% 40%

Financials

I.T

Industrials

Other

Debt securities

ConsumerDiscretionary

Short equity

Cash

Metrics

Asset allocation

Regional exposure

$0.76 - $1.11Share price range (12 months)

Shares on issue 195.9Market capitalisation ($m) 207.6


Premium/(Discount) to post-tax NTA -11.6%Dividend yield 0.00%Dividend per share 0.0

Pre-tax asset backing* 1.23Post-tax asset backing* 1.194Premium/(Discount) to pre-tax NTA -14.1%

Franking 100%Management expense ratio 1.00%

PM Capital Global Opportunities Fund (PGF) www.pmcapital.com.au/ About PGF will utilise a fundamental bottom-up investment process, with an emphasis on uncovering intrinsic value. PGF will also analyse overseas opportunities on a valuation metric. The sector allocation will not seek to replicate any benchmark weights. Investment Objective The investment objective of PGF is to provide long-term capital growth over a 7 year plus investment horizon through a concentrated portfolio of undervalued global (including Australian) equities and other securities. Investment Guidelines PGF will have preferred exposures within the following markets;

Overseas financials

Technology equities

Specific service providers with controlling or monopolistic markets shares

Offshore retail banks

Property

Risk Management Guidelines

PGF will hold ~40 stocks

Individual holding positions will be no more than 10% of the portfolio

30% of the portfolio may be held in debt securities and 100% can be held in cash

Industry exposure cannot exceed 35% of the portfolio

Shorting selling is capped at 30% of portfolio and individual short positions may not exceed 3%

Up to 10% of the portfolio may be investment in unlisted securities

PGF Performance Total shareholder return for the year ending 30 April 2015 was 8.8% with pre-tax net asset backing increasing 30.7%.

Fig.20: PGF vs MSCI World Index ($AUD adjusted)



3 June 2015


‐5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

MSCI $AUD Adjusted TGG

0% 20% 40% 60%

Europe

USA

Asia

Other

0% 10% 20% 30%

Financials

Healthcare

Consumer…

Energy

Industrials

I.T

Telecom

Consumer Staples

Materials

Other

Metrics

Asset allocation

Regional exposure

$1.28 - $1.50

Premium/(Discount) to post-tax NTA -0.3%

Shares on issue 199.0Market capitalisation ($m) 296.5Pre-tax asset backing* 1.58Post-tax asset backing* 1.47Premium/(Discount) to pre-tax NTA -6.7%




Templeton Global Growth (TGG) www.tggf.com.au About TGG is managed by Franklin Templeton Investments Australia, a wholly owned subsidiary of Franklin Resources, a global investment organisation. Investment Objective The investment objective of TGG is to achieve long term capital growth from a globally diversified portfolio. TGG will predominately invest in listed global securities on both developed and emerging stock markets. Investment Guidelines

TGG will not follow any specific weighting range, or

Country exposure, region or industry

At any given time TGG may be fully exposed to currency risk TGG Performance Total shareholder return for the year ending 30 April 2015 was 21.6% with pre-tax net asset backing increasing 17.5%.

Fig.21: TGG vs MSCI World Index ($AUD adjusted)



Baillieu Holst Ltd ABN 74 006 519 393 www.baillieuholst.com.au

This document has been prepared and issued by:

Baillieu Holst Ltd ABN 74 006 519 393

Australian Financial Service Licence No. 245421 Participant of ASX Group Participant of NSX Ltd

Analysts’ stock ratings are defined as follows:

Buy: The stock’s total return is expected to increase by at least 10-15% from the current share price over the next 12 months.

Hold: The stock’s total return is expected to trade within a range of ±10-15% from the current share price over the next 12 months.

Sell: The stock’s total return is expected to decrease by at least 10-15% from the current share price over the next 12 months.

Disclosure of potential interest and disclaimer:

Baillieu Holst Ltd (Baillieu Holst) and/or its associates may receive commissions, calculated at normal client rates, from transactions involving securities of the companies mentioned herein and may hold interests in securities of the companies mentioned herein from time to time. Your adviser will earn a commission of up to 55% of any brokerage resulting from any transactions you may undertake as a result of this advice.

When we provide advice to you, it is based on the information you have provided to us about your personal circumstances, financial objectives and needs. If you wish to rely on our advice, it is important that you inform us of any changes to your personal investment needs, objectives and financial circumstances.

If you do not provide us with the relevant information (including updated information) regarding your investment needs, objectives and financial circumstances, our advice may be based on inaccurate information, and you will need to consider whether the advice is suitable to you given your personal investment needs, objectives and financial circumstances. Please do not hesitate to contact our offices if you need to update your information held with us. Please be assured that we keep your information strictly confidential.

No representation, warranty or undertaking is given or made in relation to the accuracy of information contained in this advice, such advice being based solely on public information which has not been verified by Baillieu Holst Ltd.

Save for any statutory liability that cannot be excluded, Baillieu Holst Ltd and its employees and agents shall not be liable (whether in negligence or otherwise) for any error or inaccuracy in, or omission from, this advice or any resulting loss suffered by the recipient or any other person.

Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments.

Baillieu Holst Ltd assumes no obligation to update this advice or correct any inaccuracy which may become apparent after it is given.

Disclaimer: LIC performance measurements reflect performance after all operating expenses and taxation. Using index benchmarks often understates performance as the indices used are impacted by capital events such as options, DRPs, Share Purchase Plans and placements. Dividend yields contained within are historical and are not an indication of future dividend payments before all operating expenses and tax. Total Shareholder Returns are often negatively.

Baillieu Holst Ltd ABN 74 006 519 393

AFSL No. 245421 Participant of ASX Group Participant of NSX Ltd Participant of Chi-X Australia www.baillieuholst.com.au Melbourne (Head Office) Address Level 26, 360 Collins Street Melbourne, VIC 3000 Australia Postal PO Box 48, Collins Street West Melbourne, VIC 8007 Australia Phone +61 3 9602 9222 Facsimile +61 3 9602 2350 Email [email protected] Bendigo Office Address Cnr Bridge & Baxter Streets Bendigo, VIC 3550 Australia Postal PO Box 40 North Bendigo, VIC 3550 Australia Phone +61 3 5443 7966 Facsimile +61 3 5442 4728 Email [email protected] Geelong Office Address: 16 Aberdeen Street Geelong West Vic 3218 Postal PO Box 364 Geelong Vic 3220 Australia Phone +61 3 5229 4637 Facsimile +61 3 4229 4142 Email [email protected] Newcastle Office Address Level 1, 120 Darby Street Cooks Hill, NSW 2300 Australia Postal PO Box 111 The Junction, NSW 2291 Australia Phone +61 2 4925 2330 Facsimile +61 2 4929 1954 Email [email protected] Perth Office Address Level 10, 191 St Georges Terrace Perth WA 6000 Australia Postal PO Box 7662, Cloisters Square Perth, WA 6850 Australia Phone +61 8 6141 9450 Facsimile +61 8 6141 9499 Email [email protected] Sydney Office Address Level 18, 1 Alfred Street Sydney, NSW 2000 Australia Postal PO Box R1797 Royal Exchange, NSW 1225 Australia Phone +61 2 9250 8900 Facsimile +61 2 9247 4092 Email [email protected]

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