september 2021 quarterly webinar - uploads-ssl.webflow.com

September 2021 Quarterly Webinar

2021

FOR WHOLESALE INVESTORS ONLY. The views expressed here are part of a wider portfolio investment strategy and should not be considered in isolation.

Own the world’s best businesses.

People Philosophy & Process

PortfolioConstruction

Performance

This document has been prepared by Claremont Funds Management Pty Ltd (Investment Manager) (ACN 649 280 142, ABN 38 649 280 142, CAR No. 001289207), as investment manager for the Claremont Global Fund (ARSN 166 708 792) and Claremont Global Fund (Hedged) (ARSN 166 708 407), which are together referred to as the ‘Funds’. Equity Trustees Limited (ACN 004 031 298, AFSL 240957) (“Equity Trustees”) is the Responsible Entity of the Funds. For further information on the Funds please refer to each Fund’s PDS which is available at www.claremontglobal.com.au. This document may contain general advice. Any general advice provided has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider the appropriateness of the advice with regard to your objectives, financial situation and needs. Past performance is not a reliable indicator of future performance. Future performance and return of capital is not guaranteed.

This document may contain statements, opinions, projections, forecasts and other material (forward-looking statements), based on various assumptions. Those assumptions may or may not prove to be correct. The Investment Manager and its advisers (including all of their respective directors, consultants and/or employees, related bodies corporate and the directors, shareholders, managers, employees or agents of them) (Parties) do not make any representation as to the accuracy or likelihood of fulfilment of the forward-looking statements or any of the assumptions upon which they are based. Actual results, performance or achievements may vary materially from any projections and forward-looking statements and the assumptions on which those statements are based. Readers are cautioned not to place undue reliance on forward-looking statements and the Parties assume no obligation to update that information. The Parties give no warranty, representation or guarantee as to the accuracy, completeness or reliability of the information contained in this report. The Parties do not accept, except to the extent permitted by law, responsibility for any loss, claim, damages, costs or expenses arising out of, or in connection with, the information contained in this report. Any recipient of this document should independently satisfy themselves as to the accuracy of all information contained in this report. All figures in AUD unless otherwise stated. Claremont Funds Management Pty Ltd is a wholly owned subsidiary of E&P Financial Group Limited (ABN 54 609 913 457), a signatory to the United Nations Principles for Responsible Investment (UNPRI).

Disclaimer

http://www.claremontglobal.com.au/

People

People

4

Investor Portfolio

FOR WHOLESALE INVESTORS ONLY

Industry experience Firm experience Previous firm(s)

Bob Desmond CFAHead of Claremont Global, Portfolio Manager

27 years 9 years Fleming Martin, Seilern, Insync

Adam Chandler Portfolio Manager

20 years 6 years UBS

Andrew Coultas CA (SA) Investment Analyst

12 years 4 years Foord, Sanlam

Chris Hernandez Investment Analyst

11 years 10 years Canaccord

Luke Davrain, CFA Investment Analyst

5 years 5 years N/A

Investment team experience

Philosophy & Process

Philosophy & Process

10 – 15 holdingsConcentrated portfolio

+$1.2bnFUM

8-12% p.a. over 5-7 yearsTarget absolute return

Focus on capitalpreservation

Predictableoutcomes

Repeatable process

Strategy overview

6

Investor Portfolio


Source: Claremont Global

7

Investor Portfolio


Business Quality

High returns on invested capital built on durable foundations. Organic sales growth > GDP

Capital Structure Quality

Conservatively financed, on and off-balance sheet

Management Quality

Strengthen competitive moat; allocate capital sensibly

Value

20%1 or more discount to fair value

1: Ideally, we want to buy at 20% or more discount to assessed fair value. However, the investment manager will consider portfolio inclusion where the incoming company is either at a fair value/price discount to the holding being sold down, the portfolio as a whole or, which improves the overall risk profile of the portfolio.

Investment criteria


8

Investor Portfolio


Regulation Businesses exposed to changes in government regulation or policy.

Cyclicality Businesses highly exposed to the economic cycle. “Fair weather businesses”.

Competitive intensity Businesses with many competitors and low barriers to entry. Fluid, unstable industry structures.

Narrowness Businesses overly reliant on one product, customer or supplier. “One legged stools”.

What we don’t want


9

Investor Portfolio


Dominant market positionsBusinesses with strong to dominant positions in industries with stable competitive structures.

Low cost-to-value ratioDelivering more value to customers than extracted in price. High customer retention rates.

CultureBusiness that have meaning and purpose. High employee retention rates.

Earnings power Pricing power and attractive organic growth.

BreadthServe many different end markets with many products or services.

What we do want


10

Investor Portfolio

FOR WHOLESALE INVESTORS ONLY1. Return on total invested capital – average over 10 years.2. Return on net operating assets excluding goodwill – average over 10 years. 3. Average annual growth over five years.

A focused screening process

QUANTITATIVE FILTERS QUALITATIVE FILTERS

# of companies

70,000

11,500

2,280

2,000

740

~250

Global universe

SizeMarket cap >US$3bn

ProfitabilityROIC1 >8%

RONOA2 >15%

LeverageNet debt to EBITDA <2.5x

GrowthTotal assets <10% p.a.3Issued shares <5% p.a.3

Industry exclusions

Company meetings

Industry contacts and trade publications

Peers of stocks we own

Businesses we have gotten to know and

admire over time

Company publications

PORTFOLIO15 Stocks

APPROVED35 Stocks

FOCUS LIST80 Stocks


11

Investor Portfolio


10-15

Approved List ~ 35

Discovery

~ Portfolio holdings

Portfolio candidates, due diligence completed

Quality businesses with some reservations

Quality improvement required

Watch List ~ 80

Structured, tiered, disciplined – one in, one out

Research ProcessResearch Focus List


12

Investor Portfolio


Approved list*(2-3 months) Detailed 50-page report

Detailed financial model

Annual reports

Valuation

Competitor analysis

*Highlights minimum time spent on idea, inclusion onto Approved list requires both PMs to agree and no more than one analyst to reject

Stock discovery(1-2 weeks) Short-form report

Annual reports

Call transcripts

Company call

Initial expert calls

IR/management calls

Capital allocation history

Expertcalls

Proxies

Driving ideas to approved list


13

Investor Portfolio


100

199

76

3

75

1

67

102

264

91

0

123

1

74

142

284

140

0

93

0 2

Company calls Earnings calls Conferencetranscripts

Conference Expert calls Brokermeeting

Companymeeting

2018 2019 2020 2021

We speak directly to companies, industry experts, current and former employees

2018 2019 20202021

(YTD)Company calls 100 102 142 48

Earnings calls 199 264 284 147

Conference transcripts 76 91 140 82

Conference 3 0 0 0

Expert calls 75 123 93 30

Broker meetings 1 1 0 0

Company meetings 67 74 2 1

Total 521 655 661 308

Average per day 1.43 1.79 1.81 1.82

As at June 2021

Due Diligence Activity Conducted By Team 2018 -2020

We do our own work


14

Investor Portfolio


Money made through both growth in intrinsic value and closing of valuation discount

Risk aversion remains at the heart of our strategy

Cash returns on invested capital > cost of capital

Earnings growth with a margin of safety preserves against permanent impairment

Hypothetical Example

Owning wealth-creating businesses at a valuation discount

Time-Years

$140

$100

$70

t 0 t + 1 t + 2 t + 3 t + 4 t + 5

Intrinsic value 10% p.a. growth rate

20%1 discountMarket prices15% p.a. rate of return

Earnings growth + value discipline


1: Ideally, we want to buy at 20% or more discount to assessed fair value. However, the investment manager will consider portfolio inclusion where the incoming company is either at a fair value/price discount to the holding being sold down, the portfolio as a whole or, which improves the overall risk profile of the portfolio.

15

Investor Portfolio


Evidence based multiples – not on theory/scorecard

Other measures DCF, EV/EBITDA, FCF yield in 5 years (ideally +8%)

Proprietary 5-year NPV model

Constant discount rate of 8%

No use of WACC or beta

Valuation based on empirical evidence not theory


16

Investor Portfolio


Engagement with stakeholders is a core foundation of our investment & risk management process

Engagement

• Talk to management, past and former employees

• Preference for management teams with a strong commitment to their customers, employees and communities

Proxy Voting

• Vote proxies for each and every resolution where we have authority to do so

Investor Collaboration

• Where goals and priorities align, we also engage investors through industry memberships

Our approach to sustainable investing

Engagement

Proxy VotingInvestor

Collaboration


17

Investor Portfolio


Morningstar® Sustainability Rating for Funds provides a snapshot of how well ESG risk is managed at a fund level relative to its peer group

5/5 Sustainability Rating Morningstar

Rated in Top 1% of global core managers for Morningstar Sustainalytics1

1. As at September 2021

High ESG sustainability rating

Source: Morningstar Sustainalytics

Portfolio Construction

Portfolio Construction

19

Investor Portfolio


Exposure management Driven by bottom-up idea generation25% “soft” limits on industry/sector exposure

Portfolio concentration 10 -15 high conviction ideas

Position sizing Max. weighting 10% at market or cost Highest weightings in the portfolio are highest conviction positions

Liquidity As a guide, soft limit of 10 days to exit at approx. 25% of average daily volume

Currency No active currency management apart from hedged unit trust (98-102%)

A high conviction portfolio with well-defined limits


20

Investor Portfolio


Buy decision Sell decision

Ideally 20% discount to value / risk considerations / portfolio balance If thesis disproved exit immediately “if we did not own stock, would we buy today?”

If a relative trade – 20% differential, lower than average portfolio discount Avoid status quo bias – we know we will make mistakes

Initial weight 3 - 4% Trim as discount narrows

Add to position as thesis proved out Typically exit at +20% premium to value

Max position 10% Smallest position ~3%

For purchase, both PMs to agree For sale, only one PM required

Decision-making framework


Fund Metrics & Performance

Performance

22

Investor Portfolio


Organic revenue growth EPS growth rate (five-year forward CAGR)

Source: Bloomberg, S&P 500 Ex-Financials. | Note: S&P 500 Ex-Financials growth rate includes M&A Source: Bloomberg, S&P 500 Ex-Financials

Organic growth drives returns

Source: Claremont Global as at August 2021

2%

4%

6%

8%

10%

12%

14%

16%

Feb-

18

Apr

-18

Jun-

18

Aug

-18

Oct

-18

Dec

-18

Feb-

19

Apr

-19

Jun-

19

Aug

-19

Oct

-19

Dec

-19

Feb-

20

Apr

-20

Jun-

20

Aug

-20

Oct

-20

Dec

-20

Feb-

21

Apr

-21

Jun-

21

Aug

-21

Portfolio EPS growth

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Feb-

18

Apr

-18

Jun-

18

Aug

-18

Oct

-18

Dec

-18

Feb-

19

Apr

-19

Jun-

19

Aug

-19

Oct

-19

Dec

-19

Feb-

20

Apr

-20

Jun-

20

Aug

-20

Oct

-20

Dec

-20

Feb-

21

Apr

-21

Jun-

21

Aug

-21

Portfolio 5YR AVG organic growth

Current market 5YR AVG sales growth (incl. M&A growth)

23

Investor Portfolio


Gross margin EBIT margin

Source: Bloomberg, S&P 500 Ex-Financials, Claremont Global, as at August 2021 Source: Bloomberg, S&P 500 Ex-Financials, Claremont Global, as at August 2021

Record margins highlight competitive advantage

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

60.0%

30%

35%

40%

45%

50%

55%

60%

Feb-

18

Apr

-18

Jun-

18

Aug

-18

Oct

-18

Dec

-18

Feb-

19

Apr

-19

Jun-

19

Aug

-19

Oct

-19

Dec

-19

Feb-

20

Apr

-20

Jun-

20

Aug

-20

Oct

-20

Dec

-20

Feb-

21

Apr

-21

Jun-

21

Aug

-21

Portfolio 5YR AVG gross margin Current market 5YR AVG gross margin

10.0%

15.0%

20.0%

25.0%

30.0%

10%

12%

14%

16%

18%

20%

22%

24%

26%

28%

30%

Feb-

18

Apr

-18

Jun-

18

Aug

-18

Oct

-18

Dec

-18

Feb-

19

Apr

-19

Jun-

19

Aug

-19

Oct

-19

Dec

-19

Feb-

20

Apr

-20

Jun-

20

Aug

-20

Oct

-20

Dec

-20

Feb-

21

Apr

-21

Jun-

21

Aug

-21

Portfolio 5YR AVG EBIT margin Current market 5YR AVG EBIT margin

24

Investor Portfolio


Financial leverage (current net debt/EBITDA) Return on invested capital

Note: Current market net debt/EBITDA at end of January 2020)

Source: Bloomberg, S&P 500 Ex-Financials

Strong balance sheets and quality protect capital

Source: Claremont Global, as at August 2021

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0%

5%

10%

15%

20%

25%

Feb-

18

Apr

-18

Jun-

18

Aug

-18

Oct

-18

Dec

-18

Feb-

19

Apr

-19

Jun-

19

Aug

-19

Oct

-19

Dec

-19

Feb-

20

Apr

-20

Jun-

20

Aug

-20

Oct

-20

Dec

-20

Feb-

21

Apr

-21

Jun-

21

Aug

-21

Portfolio 5YR AVG ROIC Current market 5YR AVG ROIC

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

0.0x

0.2x

0.4x

0.6x

0.8x

1.0x

1.2x

1.4x

1.6x

1.8x

2.0x

Feb-

18

Apr

-18

Jun-

18

Aug

-18

Oct

-18

Dec

-18

Feb-

19

Apr

-19

Jun-

19

Aug

-19

Oct

-19

Dec

-19

Feb-

20

Apr

-20

Jun-

20

Aug

-20

Oct

-20

Dec

-20

Feb-

21

Apr

-21

Jun-

21

Aug

-21

Portfolio net debt / EBITDA Current market net debt/ EBITDA

25

Investor Portfolio


Sector weighting Source of revenue

30%

19%16%

15%

12%

8%

Consumer Information Technology Business ServicesFinancial Services Healthcare Cash

60%

6%

20%

14%

US Americas EMEA + UK Asia Pacific

Portfolio exposure

Source: Claremont Global, as at July 2021

26

Investor Portfolio


Financial Services Technology Business Services Consumer Healthcare

A focused portfolio of great companies for the long term

Source: Claremont Global, as at July 2021

2727

Investor Portfolio

27

Investor Portfolio


7.5%Organic growth

24.8%EBIT margin

17.6%ROIC

0.5xNet debt / EBITDA

14.9%EPS growth

28.6xPENTM

3.1%Discount to value

Key portfolio metrics

Source: Claremont Global, as at September 2021

28

Investor Portfolio


MDA/SMA Unit Trust Unit Trust (Hedged)

Inception 20/5/11 18/2/14 18/2/14

FUM $900mn $66mn $163mn

Fund return p.a. 19.5%* 16.4% 14.9%

Excess return p.a.+ 5.5%* 3.0% 3.5%

Objectives Target^

Absolute return 8% – 12% p.a.

Excess return (alpha) 2% – 4% p.a.

^net return over 5 -7 years

Strategy breakdown

Source: Claremont Global, as at 31 July 2021

29

Investor Portfolio


Three Year Rolling Returns (net of fees)

A track record of consistent return

Claremont Global Fund - Unhedged


12.7% 12.7%

9.0% 9.2% 9.5%10.6% 12.8%

14.1%16.2%

12.5%

15.7%16.7% 16.7%

17.4%

20.2% 20.3%17.9%

21.5%

19.3%

14.0% 13.6%14.7%15.4% 16.2%

17.4% 17.1%

14.3%15.9%16.1%

15.3%16.2%

19.0%20.3%

19.4%20.5%

22.4%

Rol

ling

36m

ths

Aug

-18

Sep-

18

Oct

-18

Nov

-18

Dec

-18

Jan-

19

Feb-

19

Mar

-19

Apr

-19

May

-19

Jun-

19

Jul-1

9

Aug

-19

Sep-

19

Oct

-19

Nov

-19

Dec

-19

Jan-

20

Feb-

20

Mar

-20

Apr

-20

May

-20

Jun-

20

Jul-2

0

Aug

-20

Sep-

20

Oct

-20

Nov

-20

Dec

-20

Jan-

21

Feb-

21

Mar

-21

Apr

-21

May

-21

Jun-

21

Jul-2

1

Benchmark Excess return Rolling 36mths

30

Investor Portfolio


Year-to-June 2021 performance has been relatively strong across the whole portfolio

Consistent returns across portfolio

Source: Claremont Global, as at 30 June 2021

31

Investor Portfolio


Performance to 31 July 2021

Since Inception

(p.a.)5 years (p.a.) 3 years (p.a.) 2 years (p.a.) 1 year (p.a.) 6 months 3 months 1 month

Portfolio return (AUD) 19.5% 19.1% 23.9% 20.3% 39.7% 32.0% 14.1% 7.3%MSCI AC World Accum Index ex-Aust (AUD) 13.9% 14.7% 14.2% 15.9% 30.0% 18.7% 8.9% 2.9%Excess Return 5.5% 4.4% 9.6% 4.5% 9.8% 13.3% 5.2% 4.4%

*Performance figures are before fees. Inception 20 May 2011. Numbers may not sum due to rounding. Note that the performance of the model may not be exactly replicated in each individual portfolio due to management and administration fees and slight difference in portfolio weightings between individual accounts. Past performance should not be taken as an indicator of future performance.

International Focus Portfolio* *Gross of fees

Performance to 31 July 2021Since

Inception (p.a.)

5 years (p.a.) 3 years (p.a.) 2 years (p.a.) 1 year (p.a.) 6 months 3 months 1 month

Portfolio return (AUD) 16.4% 17.6% 22.3% 18.9% 38.0% 31.1% 13.8% 7.2%MSCI AC World Accum Index ex-Aust (AUD) 13.4% 14.7% 14.2% 15.9% 30.0% 18.7% 8.9% 2.9%Excess Return 3.0% 2.9% 8.1% 3.0% 8.1% 12.5% 4.8% 4.3%Performance is net of investment management fees. Inception date is 18th February 2014. Numbers may not sum due to rounding. Since inception return is annualised and assumes reinvestment of distributions. Past performance should not be taken as an indication of future performance.

Claremont Global Fund - Unhedged

A track record of excess return


32

Investor Portfolio


Performance to 31 July 2021Since

Inception (p.a.)

5 years (p.a.) 3 years (p.a.) 2 years (p.a.) 1 year (p.a.) 6 months 3 months 1 month

Portfolio return (AUD) 14.9% 16.2% 20.4% 20.2% 40.5% 25.6% 8.2.% 4.9%

MSCI AC World Accum Index ex-Aust (AUD) 11.4% 13.3% 12.2% 16.9% 31.4% 14.3% 4.0% 0.7%

Excess Return 3.5% 2.9% 8.3% 3.3% 9.1% 11.3% 4.2% 4.2%

Performance is net of investment management fees. Inception date is 18th February 2014. Numbers may not sum due to rounding. Since inception return is annualised and assumes reinvestment of distributions. Past performance should not be taken as an indication of future performance.

Claremont Global Fund - Hedged *Gross of fees

A track record of excess return


33

Investor Portfolio


Claremont Global Fund (Unhedged)*

*Three years to end of August 2021

International Fund Portfolio

Standard Deviation 13.5%

Realised Beta 1.05

Tracking Error 5.6%

Active Share ~93%

Upside Capture Ratio 1.23

Downside Capture Ratio 0.78

High active share with downside protection


34

Investor Portfolio


Focused portfolio of 10-15 high quality names

Strong track record with downside protection

Scale to fund research and client service

Boutique culture – aligned incentives, stable team

Parent support – admin, compliance, shared services

Investment in mid-cap global leaders, without compromising liquidity

Key competitive advantages


FUM capacity $7-10B. Room for growth.

Strong relationships with tenured clients

september 2021 quarterly webinar - uploads-ssl.webflow.com

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