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ABN 14 078 030 752

ABN 14 078 030 752. Centre Capital – Australian Equities update Mark Folpp and Julian Beaumont. November 2008. ABN 14 078 030 752. AFS Licence Number 229988. About IML. IML established in 1998 IML is a ‘value-style’ investment manager: Less volatile portfolio than overall market

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ABN 14 078 030 752

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  1. ABN 14 078 030 752 Centre Capital – Australian Equities update Mark Folpp and Julian Beaumont November 2008 ABN 14 078 030 752 AFS Licence Number 229988

  2. About IML • IML established in 1998 • IML is a ‘value-style’ investment manager: • Less volatile portfolio than overall market • Prepared to deviate from index • Valuation not momentum based • Long-term portfolio positions • A boutique investment manager with over $4 Billion FUM

  3. IML seeks to buy quality companies: With a competitive advantage, with recurring earnings, run by capable management, that can grow, ........and trade at a reasonable price.

  4. Business 101

  5. Company value vs share price Value Stock Price Value of Company Time

  6. Australian shares’ golden age • Five double-digit years in a row: • 2007: 16% • 2006: 24% • 2005: 23% • 2004: 28% • 2003: 15% • Up 160% in five years (with divs.) • Best five-year period ever recorded

  7. What’s a bear market, again? Source: Bloomberg

  8. Oh… so that’s what a bear market looks like Source: Factset

  9. Nowhere to hide Source: Factset

  10. Bear markets in Australian shares since 1960 Source: Bloomberg, AMP Capital Investors

  11. ASX 300 Industrials vs ASX 300 Resources 3 year Annualised Returns to June 2008 3.300 2.800 2.300 1.800 1.300 0.800 06 07 08 05 06 06 06 06 07 07 08 07 05 05 05 06 07 07 08 - - - - - - - - - - - - - - - - - - - Jun Jun Jun Jun Apr Apr Apr Oct Feb Feb Oct Oct Feb Aug Dec Aug Aug Dec Dec ASX 300 Industrials ASX 300 Resources ASX 300 Industrials vs. ASX 300 Resources3 - year returns to June 2008 + 36% p.a. + 4% p.a.

  12. ASX 300 Industrials vs. ASX 300 ResourcesFrom 1 July to 31 October 2008 -11% p.a. -42% p.a. Source: IRESS

  13. Cautious on: • Property companies • Stocks exposed to discretionary spending • Financials • Resource stocks • Financially engineered vehicles

  14. Looking for companies with: • Defensive businesses • Good balance sheets • Long track record

  15. Resource Sector – IML’s view • Still cautious overall • Around 13% of the portfolio • Only holding good quality stocks • Still avoiding speculative stocks

  16. Iron Ore Contract Pricing Source: Bloomberg

  17. Iron Ore Source: Metal Bulletin

  18. When the music stops! Mt Gibson Mining Source: IRESS

  19. Listed Property Sector • Correction was inevitable • Sector still faces challenges • More volatility expected

  20. LPT gearing levels Listed Property Trust sector Average Debt to Total Assets Source: JP Morgan

  21. Not a pretty picture – LPT Index10 years to October 2008 Source: IRESS

  22. Financials • Avoiding investment banks • Only holding majors • Limited exposure to US sub-prime • Better positioned than overseas banks • Market share increasing

  23. The banks – rebuilding market share Source: Commonwealth Bank of Australia

  24. Australian Banks But…. • Bad debt provisions increasing • Negative impact from higher interest rates • ‘De-facto’ capital raisings occurring • Further capital raisings likely

  25. Valuations – the banks *Consensus estimates - Based on share prices at 17/10/2008

  26. Valuation – portfolio versus market IML figures as at 31/10/2008

  27. Outlook for Industrial companies • Balance sheets mostly in good shape • Some sectors facing challenges • Valuations becoming attractive • Opportunities emerging

  28. Some recent buys

  29. Other core IML holdings

  30. IML Funds v ASX 300

  31. IML equity market outlook • More volatility expected • Commodity prices stretched • Valuations becoming more attractive • Buying opportunities emerging

  32. Important information • While the information contained in this presentation has been prepared with all reasonable care, Investors Mutual Limited accepts no responsibility or liability for any errors or omissions or misstatements however caused. This is general financial product advice only and is not intended to constitute a securities recommendation. This information does not account for your investment objectives, particular needs or financial situation. Statements of opinion are those of IML unless otherwise attributed. Except where specifically attributed to another source, all figures are based on IML research and analysis. • Investors should be aware that past performance is not indicative of future performance. Returns can be volatile, reflecting rises and falls in the value of underlying investments. Potential investors should seek independent advice as to the suitability of the Fund to their investment needs. The fact that shares in a particular company may have been mentioned should not be interpreted as a recommendation to either buy, sell or hold that stock. Any commentary about specific securities is within the context of the investment strategy for the given portfolio. Investors Mutual Limited is the issuer of the Investors Mutual Australian Share Fund, Investors Mutual Industrial Share Fund, Investors Mutual Future Leaders Fund, Investors Mutual Australian Smaller Companies Fund and Investors Mutual Diversified Value Fund. Applications can only be made on the form in the current Product Disclosure Statement dated 1June 2006, or for Investors Mutual Diversified Value Fund, dated 21st March 2005, or through IDPS products that include these Funds. The Product Disclosure Statement can be obtained by contacting Investors Mutual or on www.iml.com.au. Potential investors should consider the Product Disclosure Statement before deciding whether to invest, or continue to invest in the Funds. • The prospective P/E ratios and earnings forecasts referred to in this presentation constitute estimates which have been calculated by IML's investment team based on IML's investment processes and research.

  33. Centre Capital Client Briefing GVI Investment Update From uncertainty to fundamentals The rising importance of dividends in total returns November 2008 ABN 76 111 397 392 AFS Licence No. 308107

  34. Valuations around the world JAPAN PE: 11.3x DY: 2.8% EMU PE: 7.9x DY: 6.0% NORTH AMERICA PE: 13.8x DY: 2.9% UK PE: 7.2x DY: 5.6% HONG KONG PE: 8.3x DY: 5.0% SINGAPORE PE: 6.8x DY: 5.5% AUSTRALIA PE: 11.0x DY: 6.0% Source: FactSet October 31, 2008

  35. Reasons behind the falls • Global financial crisis now impacting real economies • US, UK, EU and Japan close to or in recession. • Global growth slowing as spending contracts and credit remains scarce. • Investor confidence has collapsed. • Market being driven by fear and indiscriminate selling. • Hedge funds contributing to volatility with forced selling.

  36. Sectors - Where are the greater risks? • Financials - difficult operating environment • Consumer discretionary - Consumers lower discretionary income

  37. Is going overseas that different?

  38. Ways GVI aims to lower risk • Portfolio substantially hedged back into $AUD • Portfolio can hold up to 20% cash • No direct emerging markets exposure • Only hold stocks that make profits & pay dividends • Non-benchmark approach to investing

  39. GVI - Non-benchmark approach As at September 30, 2008 Source: MSCI, GVI

  40. GVI - Non-benchmark approach As at September 30, 2008 Source: MSCI, GVI

  41. Investment opportunities Telecom, utilities, and pharma sector • KPN and Telefonica – delivering consistent shareholder value • E.On, GDF and RWE – limited impact on EPS during recession • Johnson and Johnson has a highly diversified product mix with market positions. • All of these companies have the following in common • Dependable management • Strong cash flow generation • Clear vision business model • Good cash returns to shareholders

  42. Investment opportunities

  43. What do we look for in stocks? Strong Management Strong Business • Competitive advantage • Strong business model • Consistent and predictable earnings • Strong balance sheet • Ability to grow earnings and dividends over time • Proven track record • Ability to grow shareholder value • Clear vision Attractive Valuation Companies we invest in

  44. Portfolio remains attractively valued As at October 31, 2008* Indicates GVI forecasts Source: Figures based on GVI research and data from Morgan Stanley Research

  45. Dividends – the power of compounding

  46. Dividend growth stocks outperform Historical total returns of stocks in S&P 500 1972 - 2006 Source: Ned Davis Research - Returns based on monthly equal-weighted geometric average of total returns of S&P 500 reconstituted monthly

  47. GVI –Dividend Yield Dispersion 2008 As at September 30, 2008 Source: GVI

  48. Balance sheet strength Outstanding Very High Quality High Quality Source: FactSet / GVI September 30, 2008

  49. Market outlook and GVI’s strategy • Market uncertainty and volatility likely to continue • Businesses with strong balance sheets and cash flows will over the long-term outperform • Opportunities emerging given indiscriminate selling • Cash flow generation is key to a company’s ability to pay dividends

  50. License information & Disclaimer • Treasury Group Investment Services Limited (“TIS”) is the responsible entity for the GVI Global Industrial Share Fund (the “Fund”). Applications can only be made on the form in the current Product Disclosure Statement dated 1 June 2006, or through IDPS products that include this Fund. The Product Disclosure Statement can be obtained by contacting Global Value Investors www.gvi.com.au Potential investors should consider the Product Disclosure Statement before deciding whether to invest or continue to invest in the Funds. • While the information contained in this presentation has been prepared with all reasonable care, Global Value Investors Limited (GVI) and Treasury Group Investment Services Limited (TIS) accept no responsibility or liability for any errors or omissions or misstatements however caused. This is not personal advice and is not intended to constitute a securities recommendation. This information has been prepared without taking account of your objectives, particular needs or financial situation. Statements of opinion are those of GVI and TIS unless otherwise attributed. Except where specifically attributed to another source, all figures are based on GVI and TIS research and analysis. • TIS has also appointed the staff of Investors Mutual Limited (IML) as authorised representatives to provide general product advice in relation to this Fund. As the licensee, TIS will be responsible for any financial services provided by TIS on behalf of GVI, and for the conduct of GVI and IML staff in their capacity as authorised representatives of TIS. • This presentation is given by an authorised representative of TIS. • Investors should be aware that past performance is not indicative of future performance. Returns can be volatile, reflecting rises and falls in the value of underlying investments. Potential investors should seek independent advice as to the suitability of the Fund to their investment needs. The fact that shares in a particular company may have been mentioned should not be interpreted as a recommendation to either buy, sell or hold that stock. • The prospective P/E ratios and dividend yields referred to in this presentation constitute estimates which have been calculated by GVI’s investment team based on GVI’s investment processes and research.

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