Optimum Australian Equities Value FundIntroduction and Launch

5th January Prepared by Heinrich Jacobs

Managing Director & Chief Investment Officer

Disclaimer

Op#mum  Capital  Management  Pty  Ltd  ABN  60  154  164  020  (also  referred  to  in  this  presenta#on  as  “Op#mum  Capital  Management”,  “the  Trustee”,  “the  Manager”,  “us”,  “we”  and  “our”)  is  the  Trustee  and  Investment  Manager  of  the  Op#mum  Australian  Equi#es  Value  Fund  (“the  Fund”)  ABN  38  923  100  447.  The  Trustee  is  a  corporate  authorised  representa#ve  (No.  467287)  of  Lanterne  Strategic  Investors  Pty  Ltd  (ABN  49  098  472  587,  AFSL  238198).  

This  presenta#on  is  not  a  recommenda#on  to  invest  in  the  Fund  and  may  not  include  all  of  the  informa#on  that  a  prospec#ve  investor  needs  to  make  an  investment  decision.  Op#mum  Capital  Management  does  not  take  into  account  the  individual  circumstances  of  any  prospec#ve  investor,  nor  does  it  give  any  advice  whatsoever  but  to  the  extent  that  it  does,  it  cons#tutes  only  general  advice  and  not  personal  advice.  Accordingly,  prospec#ve  investors  should  make  their  own  independent  enquiries  and  obtain  professional  legal,  financial,  tax  and  accoun#ng  advice  before  making  an  investment  decision.  

ContentsWho  We  Are  

What  We  Do  

How  We  Are  Different  

Overview  of  the  Fund  

Our  Investment  Philosophy  

Our  Investment  Strategy  

Our  Investment  Process  

Why  ROE  &  Good  Capital  Management  are  cri#cal  

Example  of  a  model  poraolio  (compounding  businesses)  

Example  of  a  poor  business  with  bad  economics  

Conclusion  

How  to  Invest  

Who we are• Op#mum  Capital  Management  is  independent  and  privately  owned  investment  management  firm  located  in  Melbourne,  Australia  

• A  highly  experienced  team  (and  growing)  with  five  decades  of  banking,  markets,  and  diversified  industry  experience  

• Specialist  exper#se  in  Risk  Management,  Financial  Analysis,  Business  Valua#ons,  Corporate  Strategy  Development,  Corporate  Governance

The Team• Combined  12  years  financial  advisory,  investments,  business  management  and  leadership  experience  

• Banking  &  Finance,  Technology,  and  Diversified  Industries  

• Previous  management  posi#ons  at  ANZ  Bank,  Suncorp  Bank,  Tennis  Australia  &  Metcash  

• Established  and  managed  a  number  of  businesses  at  ANZ  with  FUM  $100m  –  $1.5b  

• Acquired  advanced  technical  and  fundamental  skills  and  exper#se  with  focus  on  equi#es,  investment  lending,  liquidity,  risk  management,  property,  transac#onal  banking,  and  balance  sheet  analysis  

• Educa#on:  Master  of  Business  Administra#on  (MBA)  &  Post  Graduate  Cer#ficate  in  Management  (Dis#nc#on)

• 25  years  of  financial  markets  experience  

• Currently  the  Principal/Director  of  Lanterne  Asset  Management  and  the  Chief  Opera#ng  Officer  for  Avenir  Capital  

• Prior,  Director  at  Credit  Suisse  First  Boston  Australian  Equi#es  &  Bain  &  Company  in  London  

• Peter’s  primary  role  is  focused  on  providing  risk  management,  governance,  and  compliance  oversight  for  our  Australian  Equi#es  Value  Fund

Heinrich Jacobs Managing Director &

Chief Investment Officer

Peter Cozens Non-Executive Director

The Team

• Experienced  CEO,  Lawyer,  and  former  Director  of  companies  including  Coles  Myer  Group,  GE  Capital,  Pacific  Diamond,  Retail  Franchise  Solu#ons,  Midas  Asia  Pacific,  and  the  DBYD  Group  

• Exper#se  covers  business  management,  finance,  corporate  structuring,  strategic  planning,  due  diligence,  and  business  acquisi#ons  and  divestures  across  the  building,  finance,  franchise,  wholesale,  retail,  automo#ve,  mining,  and  u#li#es  sector  

• Currently  the  CEO  of  the  Australian  Associa#on  of  Dial  Before  You  Dig  Services  

• Currently  holds  several  board  posi#ons  including  the  Australian  Government  Solicitor  and  Torus  Group  

• Educa#on  &  Memberships:  Bachelor  of  Laws  &  Bachelor  of  Commerce  (University  of  Melbourne);  Cer#fied  Prac#cing  Accountant  (CPA);  MAICD;  LIV

Sophie Valkan Non-Executive Director

What We Do

• We  act  as  a  financial  fiduciary  for  our  clients  

• Provide  investors  with  access  to  one  high  quality  investment  product  that  meets  a  broad  range  of  needs,  including  income  and  capital  growth  

• We  manage  money  (equity  capital)  on  behalf  of  trustees  and  advisers  of  self-­‐managed  superannua#on  funds,  high  net  worth  individuals,  companies,  and  charitable  founda#ons  

• We  seek  to  iden#fy  high  quality  companies  for  inclusion  in  the  fund  that  will  offer  good  long-­‐term  capital  growth  opportuni#es,  with  a  stable  and  reliable  income  stream  with  low  to  moderate  risk  

• We  conduct  extensive  market  research,  stock  selec#on,  and  the  buying  and  selling  in  rela#on  to  the  securi#es  in  our  Investment  Fund  

• Our  absolute  focus  is  to  protect  our  clients  capital  (and  ours)  and  ensure  all  investments  offer  a  margin  of  safety

How Are We Different?

Large Institutional Funds Optimum Capital Management

CON’S

• The size of asset base can limit the ability to move in and out of the best investments

• Market Capitalisation-weighted strategies suffer from an inherent bias towards “hot” segments of the market, and often feature concentrated economic bets

• Market Cap weighted and tend to focus only on large cap companies, missing valuable opportunities in the mid-small cap space

• Can be expensive relative to size and management have no skin in the game. Poor alignment of interests

• No skin in the game. Very poor alignment of interests between management and investors

• Limited flexibility, bureaucracy, slow decision making

PRO’S• We will have a smaller asset base giving us the ability to

move in and out of the best investment opportunities

• Our only bias is to invest in the very best companies that we can buy at a discount to valuation, regardless of economic trends, fads etc

• We have a Market Cap agnostic strategy. We will invest across the spectrum; large, medium, small, and micro cap

• Good value relative to size. Tight cost controls

• Excellent alignment of interests between management and investors

• Very flexible, nibble, and flat structure

Overview Of The FundInvestment(Strategy(and(Objec3ve( To(provide(investors(with(superior(long<term(absolute(returns(in(

the(form(of(capital(growth(and(income(from(a(por>olio(of(shares(in(excep3onal(Australian(&(New(Zealand(companies(listed(companies(on(the(ASX(that(we(can(buy(at(an(aErac3ve(price(

Por>olio(Structure(&(Weigh3ngs( 15(–(30(Companies(0%(<(100%(Equi3es(0%(<(100%(Cash(No(short(selling(No(financial(leverage((

Benchmark( All(Ordinaries(Accumula3on(Index((XAOAI)(

Investor(Profile( Sophis3cated,(Professional(and(Wholesale(Investors.(A(limited(number(of(retail(investors(via(a(personal(offer(

Risk(Profile( Medium(

Suggested(Investment(Period( Five(years(

Our Investment Philosophy

• We  are  a  disciplined  investor  seeking  out  investment  opportuni#es  in  companies  that  we  can  purchase  at  a  discount  to  our  assessment  of  the  fundamental  value  or  intrinsic  value  of  the  company  

• High  convic#on  fund  with  a  concentrated  strategy  

• “Margin  of  safety”  and  valua#on  is  at  the  heart  of  our  investment  philosophy  and  investment  selec#on  process  

• Bonom-­‐up,  Fundamental  Analysis

Our Investment Strategy

•  Thorough' understanding' of' bo1om' up'fundamental'analysis'and'value'opportunity'

'

Op8mum'Capital'Management'Core'Competency'

Proven'Track'Record'

Ac8ve'Capital'Alloca8on'

Exper8se'

Disciplined'&'Repeatable'Investment'Process'

Strong'Risk'Management'Culture/Systems'

Focused'on'business'fundamentals'&'valua8on'

Fundamental*Value*Based*Approach*

Focus*on*Catalysts*

Seeking*Compelling*Opportuni;es*

•  Seek' companies'with' short' term' imperfec8ons' in'fundamentals'

•  Pursue' special' situa8ons' and' transforma8onal'events' such' as' corporate' takeovers' that' drive'shareholder'value'

•  Mispriced'assets'with' temporary'flaws' caused'by'general'market'condi8ons,'sen8ment,'strategy,'or'other'company'specific'issue.'

Our Investment Process

Our$ investment$process$ starts$by$selec3ng$of$ the$2,200$$ASX$ Listed$ Companies$ the$ 700$ companies$ that$made$ a$profit$in$the$past$12$months.$ASX Listed

Companies

• $2,200$companies$

Quantitative Screen

• $Financial$Modeling$Phase$• $Ranking$Process$(Financial$Strength$|$Profitability$&$Growth)$$• $Investable$Universe$~$700$issues$

Qualitative Screen

• $Idea$Genera3on$• $Strong$Business$Models$• $Durable$Compe33ve$Advantages$• $Management$Team$• $Investee$Universe$~$90$W$150$companies$

Portfolio Construction

• $15$–$30$companies$selected$for$investment$

From$the$700$companies$we$individually$rank$companies$using$a$ range$of$metrics$ to$ shortWlist$down$ to$90$–$150$companies.$Metrics$include:$

W  PEG$

W  OCF$&$FCF$yield$

W  Cash,$Debt,$and$Growth$rate$levels$

The$final$stage$is$a$qualita3ve$screen$and$“deep$dive”$into$the$quality$of$the$management$team,$and$assess$the$strength$of$the$companies$business$model$and$if$it$has$any$durable$compe33ve$advantages$that$allow$for$sustainable$ growth$ over$ the$ investment$ cycle.$ From$the$ 90$ –$ 150$ companies$ we$ select$ the$ final$ 15$ –$ 30$companies$to$make$up$the$investment$por`olio.$

Why ROE & Good Capital Management Are Critical (example)

!!Year!

Business!!Beginning!Equity!($)!

!!Return!on!Equity!(%)!

!!Earnings!($)!

!!Payout!Ra7o!%!

!!Dividends!($)!

!!Ending!Equity!($)!

Market!!P/E!Ra7o!

!!Share!Price!($)!

0" 10" 2.50"

1" 1.00" 25" 0.25" 0" 0" 1.25" 10" 3.10"

2" 1.25" 25" 0.31" 0" 0" 1.56" 10" 3.90"

3" 1.56" 25" 0.39" 0" 0" 1.95" 10" 4.80"

4" 1.95" 25" 0.48" 0" 0" 2.43" 10" 6.00"

5" 2.43" 25" 0.60" 0" 0" 3.03" 10" 7.50"

Annual!Rate!of!Return!

!25%!

If you buy and sell shares in a company on the same P/E ratio, and assuming the company does not pay a dividend and it is able to generate a high rate of return on equity, then all things being equal the earnings and the share price will grow at the same rate as the ROE which in this case is 25%

Consider this

Example of a Model Portfolio (Compounders)Company( ASX(

Code(ROE((%)(

Forecast(Dividend(Yield((%)(

Ini?al(Rate(of(Return(

(%)(

Total(Returns((10(year(Avg(%)(

Market(Cap((m)(

Compe??ve(Advantage(

ANZ$Bank$ ANZ$ 16$ 8.5$ 8.10$ 10.5$ 88,847$ Oligopoly$

Ainsworth$Game$Technology$

AGI$ 26$ 5$ 7.80$ 10$ 780$ Knowledge/Experience$

CSL$ CSL$ 41$ 1.5$ 3.5$ 26$ 41,464$ Patents/reputaPon$

Seek$ SEK$ 19$ 2.5$ 3$ 25$ 6,000$ Network$effect$

Breville$Group$ BRG$ 23$ 5.5$ 5.5$ 17$ 870$ Brand/ReputaPon/Design$

Woolworths$ WOW$ 24$ 7$ 6.5$ 11.5$ 38,690$ Low$cost/brand/logisPcs/geographic$monopoly$

Carsales$ CRZ$ 51$ 5.2$ 3.7$ 22$ 2,524$ Network$effect$

Iproperty$ IPP$ 6$ X$ 1.1$ 90$ 352$ Network$effect$

Resmed$ RMD$ 20$ 1.7$ 3.8$ 16$ 9,685$ Patent/reputaPon$

Flight$Centre$ FLT$ 24$ 7$ 8.20$ 11.5$ 3,300$ Footprint/reputaPon$

McMillian$Shakespeare$

MMS$ 25$ 7.5$ 7$ 26$ 826$ Switching$costs$

TOTAL(AVERAGE(

25%(( 4.7%( 5.3( 24%(

A Business With Poor Economics (example)

2000##$2.9b&&&&&&&&&&Equity&

2010##$5.8b&&&&######Equity&

$3.1b&&&&&&&&&&Debt& $5.6b&&&&&&&&&&Debt&

$517m&&&&&&&&Profit& $116m&&&&&&&&Profit&

ROE&&&&&&&&&&&&&18%& ROE&&&&&&&&&&&&&2%&

Note  the  addi#onal  $2.9b  in  equity  you  have  contributed  and  the  addi#onal  $2.5b  in  debt  to  keep  this  business  going.    

Return  on  Equity  less  than  what  you  can  get  in  a  term  deposit.  

Conclusion

• Alignment  of  interests  between  investors  and  members  of  the  investment  team  

• Focus  on  a  single  fund,  one  product,  one  set  of  fees  

• Investment  focus  on  companies  that  provide  a  reliable  and  increasing  income  stream  with  tax  awareness  benefits  (franked  dividends)  

• Experienced  management  team  and  board  of  directors  with  “diversified”  experience  

• Repeatable  and  reliable  investment  process    

• Flexible  investment  mandate  (market  capitalisa#on  agnos#c;  can  be  fully  invested  or  hold  cash  depending  on  market  risk  and  valua#ons)  

• Tight  cost  controls  

• We  invest  our  own  capital  alongside  investors  

• Our  size  gives  us  a  compe##ve  advantage.  We  can  move  quickly  and  are  not  subject  to  internal  bureaucracy  and  slow  decisions  making

How To Invest• The  next  step  is  to  read  the  Informa#on  Memorandum  (IM)  and  then  complete  the  Applica#on  Form  anached  to  the  IM.  

• Applica#on  forms  and  monies  are  to  be  submined  to  Apex  Fund  Services  and  details  can  be  found  in  the  Applica#on  Form.  

• If  you  require  a  copy  of  the  IM  please  email  Heinrich  Jacobs  (Chief  Investment  Officer)  at  info@op#mum-­‐capital.com.au    

• Visit  our  website  at  www.op#mum-­‐capital.com.au  

Thank  you