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All Star Funds// All Star KFM Income Fund Kaplan Funds Management October 2013

All Star Funds// All Star KFM Income Fund Kaplan Funds Management October 2013. Disclaimer.

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All Star Funds// All Star KFM Income Fund Kaplan Funds Management October 2013

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  1. All Star Funds// All Star KFM Income Fund Kaplan Funds Management October 2013

  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 All Star KFM Income Fund - Investment changes • Maintain overall conservative portfolio settings • Increased buy & writes with volatility spike in May & June and added to resource exposure July & August • Active in capital raisings (hybrids, utilities, property trusts) • Delivered strong Sept quarter performance of 4% (after fees & expenses) and 11% over 12 months. • Focused on maintaining low volatility (3.5% vs ASX volatility 11.5%) Investment Environment • QE tapering deferred • Temporary liquidity charge • Economic stability creating risk appetite • Interest rates to remain low In the absence of weak A$ and fiscal spending • Cautious outlook due to risks associated with eventual unwinding of money printing and the attendant distortions created in capital markets.

  5. Investment Sectors-ASX Listed Sector attributes and positioning • Buy & Writes/buy stock sell call options/seek high volatility & low equity valuation • Positioning: underweight/low volatility and high equity valuations • Interest Rate Securities/ hybrids & corporate bonds/seek good credit & wide spreads & redeemable structures • Positioning: overweight/good credit/high fixed spreads/acceptable structures • Utilities & Infrastructure/ seek reliable cash-flow and asset growth • Positioning: underweight/regulatory risk subsiding/bond yield sensitive • Property Trusts/seek reliable cash-flow and income growth • Positioning: neutral/yields normalised/price near NTA

  6. Investment Sectors-ASX Listed

  7. Portfolio Mix Sector allocation (30 Sept 2013) Sector ranges

  8. Portfolio Activity Active sector management (4 months to 30 September 2013) • Increased buy & writes 11% captured market volatility spike in May & June with higher option prices. • Added to resource holdings • Reduced cash to lift portfolio running yield to 6.7%

  9. Buy & Write Exposure Buy & Writes/highest risk sector /Active Management • Risk reduction into rising equities market with low volatility • Re-built buy & write positions following equities correction and higher volatility in May & June in Banks & Telstra • Increased resource exposure through BHP & WPL on yields of 5% and 9% respectively in July & August

  10. Buy & Write Returns – dividend focus Buy & Write – BHP

  11. Buy & Write Returns – dividend focus Buy & Write – WPL

  12. Share Price & Volatility Buy & Write -Conditions All Ords Volatility

  13. Hybrids Security selection – hybrids & corporate bonds • 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 offering good margins. Basel III triggers acceptable/remote • Portfolio inclusion: ANZ Capital Note (ANZPD) $1.1bn, 8 year mandatory converting preference share. • Issue margin 340 bps above bank bill rate ~5.9%, Issuer credit rating AA- • Basel III compliant: Core Equity Tier 1 trigger 5.2% ($10bn capital above trigger) • Basel III compliant: Non Viability trigger (APRA determined) • Maximum conversion number equals 20% of share price ~$5.60 • Senior to ordinary equity • Listed Hybrid & Corporate Bond Market Capitalisation $37bn, • Good liquidity $600m per month turnover • Hybrid Index return 9.4% over 1 year outperformed bonds (UBS 10yr bond index -3.4%)

  14. Performance Fund performance with 1/3rd volatility of S&P/ASX200 14

  15. Performance (after fees & expenses) Portfolio returns- 1 year to 30 Sept 2013 15

  16. Performance & Yield Portfolio yield Portfolio Yield Margin above bank bills 16

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