Dear Investors,

We have recently updated information reported in our monthly Value Fund factsheet – below we outline key additions you can now expect to see detailed including a link to our latest release.

The additions to the factsheet are driven by our current transitioning of the Value Fund and the Manager to being licensed under the FMCA (Financial Markets Conduct Act - 2013) and our desire to continually improve transparency for investors in the Fund.

Key additional information includes:

  • A Risk Indicator located which details (utilising a set formula recommended by the FMA for calculation) the Fund’s historical volatility and provides a gauge of risk (found on Page 1 of the factsheet);
  • A complete listing of the Fund’s portfolio with movements intra-month now highlighted. This includes new positions and any divestments detailed beneath with their respective returns. This listing also details whether there is a research presentation available for a company, accessible on our website at http://www.elevationcapital.co.nz/current-investments (Page 2);
  • A comparative performance chart which details the Fund’s performance versus NZ CPI + 5% and iShares MSCI All Country World Index ETF (Page 3);
  • A detailed breakdown of the Funds expenses on an annual basis and Total Expense Ratio (Page 4).

We encourage investors to contact us if they would like further information included in the fact sheet or have any questions with regard to these additions.

In terms of performance last month (June 2016) the Value Fund declined -5.18%. This was principally driven by currency movements with our underlying holdings in local currency terms largely flat for the month.

The currency movements during the month were sizeable driven principally by volatility caused on the back of the UK’s vote to leave the EU. Refer to our Brexit note dated 26 June 2016 - here.

It is important to reiterate the Value Fund is an un-hedged investment vehicle and therefore currency movements do impact the Fund’s returns on a monthly basis. The Manager has in its proverbial “tool kit” the ability to hedge the portfolio if it chooses. We have never entered into a FX hedging transaction since the Fund’s inception. With respect to the Fund, our view remains that our customers best interests are served by remaining un-hedged on a long-term basis given the majority of the investors are New Zealand domiciled and have most of their assets and earnings derived from/in New Zealand. (In line with the Fund’s mandate, we reserve the right to change this view subject to market conditions / exogenous shocks.)

As detailed on Page 2 of the fact sheet we reduced our cash holding from +20.8% to approximately +15.4% during June as we added to our holdings in Time Warner, Discovery Communications, Tribune Media, Pental, Tiffany & Co, MSG Networks, Viacom, De La Rue, Swatch Group, Tod’s, Dufry, and Richemont.

The price changes from the average prices we paid on each of these portfolio additions are detailed below:

We also attempted to take advantage of the sell-off in the UK market and acquired a new position in luxury goods manufacturer - Jimmy Choo plc.

Subsequent to month end portfolio activity has continued:

  • Remy Cointreau has been divested after ~2.5yrs for an annualised return of +21% in local currency terms; 
  • SGS SA has been divested after ~1.0 Years for an annualised return of +35% in local currency terms;
  • Mondelez has been reduced within the portfolio as it has bid for Hershey’s. We have a preference to be acquired versus being the acquirer with regard to this company so decided to monetise a very attractive return for the majority of our holding;
  • Starz announced Lionsgate was acquiring it at a +35% premium to our cost basis in a cash and stock transaction;
  • We have taken the “near cash” from Starz and reinvested into AMC Networks (the producer / owner of hit TV shows like Mad Men and Breaking Bad) - based on a sizeable discount to what we believe the company is intrinsically worth;
  • Viacom has rallied +5% on the back of comments from John Malone (a large investor in the global media sector) that Viacom is significantly undervalued - something we have concurred with for a long period of time (you can listen to John Malone's interview - here);
  • We have acquired Daimler AG the German automaker which produces Mercedes Benz trucks, cars and vans as it was aggressively sold-off on post Brexit concerns;
  • Cash is currently sitting at ~18% of the portfolio (as at 13 July 2016).

Once again, we trust you find our new format fact sheet informative and we look forward to you visiting our new website at: www.elevationcapital.co.nz

We also look forward to seeing you at our investor update evening on 29th July 2016 at 6.00pm. Address: Holy Trinity Visitors Center, Cnr St Stephens Ave & Parnell Road, Parnell, Auckland.

annabelle rose

Annabelle Rose Design, 65 Ponsonby Rd, Auckland, Auckland, 1011, New Zealand