ABN 14 078 030 752

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
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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

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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.

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Business 101
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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

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Whats a bear market, again?
Source Bloomberg
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Oh so thats what a bear market looks like
Source Factset
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Nowhere to hide
Source Factset
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Bear markets in Australian shares since 1960
Source Bloomberg, AMP Capital Investors
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ASX 300 Industrials vs. ASX 300 Resources3 -
year returns to June 2008
36 p.a.
4 p.a.
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ASX 300 Industrials vs. ASX 300 ResourcesFrom 1
July to 31 October 2008
-11 p.a.
-42 p.a.
Source IRESS
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Cautious on

• Property companies
• Stocks exposed to discretionary spending
• Financials
• Resource stocks
• Financially engineered vehicles

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Looking for companies with

• Defensive businesses
• Good balance sheets
• Long track record

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Resource Sector IMLs view

• Still cautious overall
• Around 13 of the portfolio
• Only holding good quality stocks
• Still avoiding speculative stocks

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Iron Ore Contract Pricing
Source Bloomberg
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Iron Ore
Source Metal Bulletin
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When the music stops! Mt Gibson Mining
Source IRESS
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Listed Property Sector

• Correction was inevitable
• Sector still faces challenges
• More volatility expected

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LPT gearing levels
Listed Property Trust sector Average Debt to
Total Assets
Source JP Morgan
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Not a pretty picture LPT Index10 years to
October 2008
Source IRESS
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Financials

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

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The banks rebuilding market share
Source Commonwealth Bank of Australia
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Australian Banks

• But.
• Bad debt provisions increasing
• Negative impact from higher interest rates
• De-facto capital raisings occurring
• Further capital raisings likely

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Valuations the banks
Consensus estimates - Based on share prices at
17/10/2008
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Valuation portfolio versus market
IML figures as at 31/10/2008
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Outlook for Industrial companies

• Balance sheets mostly in good shape
• Some sectors facing challenges
• Valuations becoming attractive
• Opportunities emerging

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Some recent buys
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Other core IML holdings
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IML Funds v ASX 300
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IML equity market outlook

• More volatility expected
• Commodity prices stretched
• Valuations becoming more attractive
• Buying opportunities emerging

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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
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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
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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.

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Sectors - Where are the greater risks?

• Financials - difficult operating environment
• Consumer discretionary - Consumers lower
  discretionary income

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Is going overseas that different?
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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

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

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Investment opportunities
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What do we look for in stocks?
Strong Business
Strong Management

• 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
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Portfolio remains attractively valued
As at October 31, 2008 Indicates GVI
forecasts Source Figures based on GVI research
and data from Morgan Stanley Research
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Dividends the power of compounding
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Dividend growth stocks outperform
Historical total returns of stocks in SP 500
1972 - 2006
Source Ned Davis Research - Returns based on
monthly equal-weighted geometric
average of total returns of SP 500 reconstituted
monthly
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GVI Dividend Yield Dispersion 2008
As at September 30, 2008 Source GVI
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Balance sheet strength
Outstanding
High Quality
Very High Quality
Source FactSet / GVI September 30, 2008
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Market outlook and GVIs 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 companys
  ability to pay dividends

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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 GVIs
  investment team based on GVIs investment
  processes and research.