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All Star Funds// All Star KFM Income Fund Kaplan Funds Management February 2014

All Star Funds// All Star KFM Income Fund Kaplan Funds Management February 2014. Disclaimer.

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All Star Funds// All Star KFM Income Fund Kaplan Funds Management February 2014

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  1. All Star Funds// All Star KFM Income Fund Kaplan Funds Management February 2014

  2. Disclaimer Past performance is not necessarily indicative of future performance. This document has been prepared and issued by Ventura Investment Management Limited, ABN 49 092 375 258, AFSL 253045 (Ventura). Equity Trustees Limited ABN 46 004 031 298, AFSL 240975 (EQT) is the responsible entity of the Ventura and All Star series of funds. Information contained in this document is of a general nature only. It is not intended as advice, as it does not take into account your individual objectives, financial situation or needs. Investment can only be made on an application form attached to the Product Disclosure Statement (PDS) or through an IDPS operator. Copies of the PDS are available from Ventura or your financial planner.

  3. Contents • Investment Overview/Environment • Portfolio Mix & Activity • Buy & Write Positioning & Returns • Hybrids • Performance

  4. Investment overview - KFM Investment Environment • Reduction in money printing- creating volatility • Realisation that China is slowing • Interest rates to remain low • GDP growth sub-trend • Government challenge to maintain confidence and cut costs • Cautious outlook due to risks associated with eventual unwinding of money printing and the attendant distortions created in capital markets. • Environment suitable for income strategies.

  5. Fund Investment Sectors-ASX Listed Diversified sources of income under active management

  6. Portfolio Mix Sector allocation (31 Jan 2014) Sector ranges

  7. Investment Sectors - ASX Listed

  8. Buy & Write Exposure Buy & Writes/highest risk sector /Active Management • Risk reduction in Banks & Telstra through option exercise into rising equities market . • New IAG position established through discounted stock placement.

  9. Buy & Write Returns – dividend focus Buy & Write – IAG

  10. Share Price & Volatility Buy & Write –Conditions - low volatility & moderate valuations ASX200 Volatility

  11. Hybrids & Corporate Bonds- ASX • Strategic preference for high margin floating rate hybrids in current environment. • High fixed margins help protect returns as rates fall and the floating rate structure benefits if rates rise. • Quality credit. Well regulated bank industry. Basel III triggers acceptable/remote • Hybrid Index return 6.5% over 1 year outperformed bonds (UBS Composite bond index 1.99%-lowest return since 2009) • Listed Hybrid & Corporate Bond Market Capitalisation $38bn, • Good liquidity $500-600m per month turnover

  12. Hybrids & Corporate Bonds Security selection – hybrids & corporate bonds • Banks are rebuilding their capital base. • New issue: ANZ Capital Note 2 (ANZPE) ~$1.5bn, 10 year mandatory converting preference share. • Issue margin 325-340 bps above bank bill rate ~6.0% (including franking) • New capital requirements for D-SIB (4 majors) +1% capital buffer to minimum 8% CET1 ratio by 2016. • ANZ’s capital ratio 7.9%, $9.8bn in excess of trigger, plus $6.8bn in profits pa. (10.8% harmonised ratio) • Core Equity Tier 1 conversion into equity trigger at 5.125% ($10bn capital above trigger) • Basel III compliant: Non Viability trigger for write off (APRA determined ~ catastrophic event) • Floor price equals 20% of share price ~$6.00, market cap buffer $68bn. • Capital Notes are senior to ordinary equity

  13. Hybrids – Equity takes the hit

  14. Performance (after fees & expenses) Portfolio returns- Dec year 2013- 8.62% (after fees & expenses) 14

  15. Risk Measure 15

  16. Liquidity 16

  17. Performance & Yield 17

  18. To recap • Reduction in money printing- creating volatility • Realisation that China is slowing • Interest rates to remain low • GDP growth sub-trend • Government challenge to maintain confidence and cut costs • Cautious outlook due to risks associated with eventual unwinding of money printing and the attendant distortions created in capital markets. • Environment remains suitable for income strategies to deliver good returns without excessive risk

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