Ausbil Investment Roadshow 2018 Rising volatility risks and - - PowerPoint PPT Presentation

May 2018

Ausbil Investment Roadshow 2018

“Rising volatility – risks and opportunities”

May 2018 Mark Knight – Head of Distribution

Ausbil Investment Roadshow 2018

“Rising volatility – risks and opportunities”

Returns are gross of fees. Concentrated performance is based on a composite series.

*Inception dates: Active Equity 01.07.97, Geared Equity 24.05.07, Concentrated 05.08.04, Active Sustainable 31.01.18, 130/30 Focus 14.07.10, Emerging Leaders 01.05.02, MicroCap 12.02.10

April 2018 3 months (% pa) 6 months (% pa) 1 year (% pa) 5 years (% pa) Inception* (% pa) Return Excess Return Excess Return Excess Return Excess Return Excess Active Equity 2.0 +1.7 6.5 +3.1 11.2 +5.5 9.7 +2.2 11.3 +3.1 Geared Equity 4.2 +3.9 13.9 +10.4 24.0 +18.3 20.7 +13.1 9.6 +5.6 Concentrated 2.6 +2.3 7.1 +3.7 11.4 +5.7 10.5 +3.0 11.3 +2.9 130/30 Focus 2.1 +1.8 6.3 +2.9 10.6 +5.1 11.4 +3.9 11.5 +2.9 Emerging Leaders 3.4 +2.7 9.6 +3.0 26.7 +10.8 13.6 +1.3 13.5 +4.0

3

Investment performance

Active process - strong results over the long term

Ausbil MicroCap

Opportunities ex 200

• Specialist investment team
• Excellent track record
• Proven process
• Spare capacity
• SQM – “Superior”

Benchmark: (S&P/ASX Emerging Companies Accumulation Index)

 A gross investment return of 30% for the year ending April versus 25% for the benchmark*  A gross investment return of 34% since inception versus 2% for the benchmark*

4

Ausbil Active Sustainable Equity

Process summary

STAGE 3: Stock Selection

Fundamental stock analysis integrated with ESG & quantitative ranking

i) ESG filter ii) Stock ranking

Refined investible universe based on ESG grounds Sustainable Earnings Evaluation Tool (SEET) analysis

STAGE 1: Macroeconomic Analysis STAGE 2: Sectoral Analysis STAGE 3: Stock Selection STAGE 4: Portfolio Construction

• What does ESG integration mean to Ausbil?

‒ more informed investment decisions can lead to better outcomes ‒ active ownership and engagement on ESG issues

5

• Adds alpha through top-down asset allocation and bottom-up credit research
• Dynamic asset allocation: different fixed income sectors outperform in different environments
• Seeks to protect capital at times of market stress
• Seeks to be more resilient than traditional strategies in rising interest-rate environments

Performance is gross of fees. *Inception date 01 June 2016. Past performance is not indicative of future results. Please see disclosures concerning comparisons to an Index.

MacKay Shields Unconstrained Bond Fund

Seeking the highest absolute, risk adjusted return

April 2018 3 months (% pa) 6 months (% pa) 1 year (% pa) Inception* (% pa) Return Excess Return Excess Return Excess Return Excess MacKay Shields Unconstrained Bond Fund

• 0.4
• 0.8

0.6

• 0.3

3.7 +2.0 6.1 +4.3

6

Your speakers

Experienced investment professionals

Jim Chronis

Chief Economist Balanced Fund

Paul Xiradis

Executive Chairman, Head of Equities Active Equities Concentrated Equities Active Sustainable Equities

Gian Pandit

Deputy Head of Equities 130/30 Focus

Mason Willoughby- Thomas

Portfolio Manager MicroCap

7

Jim Chronis Chief Economist

Ausbil Investment Roadshow 2018

Global outlook

Real GDP % yoy April 2018 Estimated Potential GDP % Average Post Crisis 2008-2016 % Official Sector Consensus 2018 (f) % Ausbil(f) 2018 % Official sector Consensus 2019 (f) % Ausbil(f) 2019 % United States 1.8 1.3 2.6 2.7-3.0 ↑↑ 2.3 2.5 ↑↑ Japan 0.7 0.4 1.3 1.4 ↑ 0.9 1.1 ↑ Eurozone 1.5 0.4 2.2 2.3 ↑↑ 1.8 2.2 ↑↑ China 5.8 8.4 6.5 6.5 ↑ 6.3 6.5 ↑ Australia 2.8 2.5 2.9 2.7-3.0 ↑ 3.0 3.1 ↑ Advanced Economies 1.1 2.3 2.4 ↑↑ 2.1 2.4 ↑↑ Developing Economies 5.1 4.7 5.0 ↑ 4.9 5.0 ↑ Global 3.3 3.8 3.9 ↑↑ 3.7 3.9 ↑↑

Global forecasts - synchronised & accelerating

3.9% growth is historically impressive

Sources: (a) International Monetary Fund, World Economic Outlook Update, released 17 Apr 2018 (b) OECD Economic Outlook Update, released 13 March 2018 (c) The World Bank, Global Economic Prospects, released 22 Jan 2018 (d) US Federal Reserve Economic Projections of Federal reserve Board Members and Federal Reserve Presidents, released 22 March 2018 (e) European Central Bank Staff Macroeconomic Projects, released 08 March 2018 (f) European Commission, released Nov 2017 (g) ECB's Survey of Professional Forecasters Oct 2017 (h) Bank of England Inflation Report , released Nov 2017 (i) Bank of Japan Economic Outlook, released 23 Jan 2018 (i) Bank of Canada Monetary Policy Report, released 17 January 2018 (k) Australian Treasury MYEFO Budget 2017-18, released 18 December 2017 (l) Reserve Bank of Australia Statement on Monetary Policy, released February 2018

9

Global growth - synchronised & accelerating

Inflationary impulse is on the horizon, costs are rising

Source: Factset, Ausbil 10

US - fiscal boom

Larger deficits from tax cuts and budget deal

Budget deal would cement return of trillion-dollar deficits

Source: CRFB calculations based on Congressional Budget Office data 11

US - fiscal boom

Capex investment lift next phase of growth

Source: Factset, Ausbil 12

US - fiscal boom

Inflation overshoot new focus for Fed policy

Source: Factset, Ausbil 13

Europe - motoring ahead

GDP accelerates to 2.7% Q4 from 3-yr average 2.1%

Source: Factset, Ausbil 14

China - “high quality” growth long term

Exporter of inflation

Source: Factset, Ausbil 15

Japan - positive output gap

Low unemployment, raising wages and inflation expectations

Source: Factset, Ausbil 16

Australia - trend growth

Business is the driver, indebted households furloughed

• 2.0
• 1.5
• 1.0
• 0.5

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5

Drivers of Real GDP Growth annual contributions by sector

1-Dec-15 1-Jun-16 1-Dec-16 1-Jun-17 1-Dec-17

Source: Ausbil 17

Australia - trend growth

Wages to rise as unemployment rate falls to 5.1%

Source: Factset, Ausbil 18

Ausbil model - Australian inflation

Forecast to be back in the range 2-3%

• 2%

0% 2% 4% 6% 8% 10% 12% 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022 Actual Forecast

Source: Ausbil 19

Reflation theme ongoing

Global

 Accelerating synchronised global growth

• Rising input costs and inflation

 Global cash rates and bond yields higher

• Quantitative tightening - US480bn 2018, 600bn 2019 & 2020
• ECB bond buying tapering to end Q3 2018

 Expansionary fiscal policy

• US tax and $1.5 trn infrastructure spend compounds reflationary growth
• Next option for Europe and other major economies

 Risks – Geopolitical and Trade Wars

20

Reflation theme ongoing

Australia

 GDP growth 2.7-3%  Unemployment rate lower to 5.1%  Expect income tax cuts for Budget 2018/19  Core inflation 2-3%  Cash rate to move higher  AUD currency - range 72 to 78c, closes at 75c  Risk? A change of government

21

Ausbil Investment Roadshow 2018

“Rising volatility – risks and opportunities”

Paul Xiradis

Executive Chairman Chief Investment Officer Head of Equities

Gian Pandit

Deputy Head of Equities

Source: Ausbil, CLSA, IBES.

Australian equity market

Broadening of earnings

• 15
• 14
• 13
• 12
• 11
• 10
• 9
• 8
• 7
• 6
• 5
• 4
• 3
• 2
• 1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Aug-2013 Feb-2014 Aug-2014 Feb-2015 Aug-2015 Feb-2016 Aug-2016 Feb-2017 Aug-2017 Feb-2018 EPS Growth (%) 2016 2017 2018 2019 FY16 = -12.6% FY17 = +12.5%

23

Apr-2018

Source: Ausbil, CLSA, IBES.

Australian equity market

Broadening of earnings

• 15
• 14
• 13
• 12
• 11
• 10
• 9
• 8
• 7
• 6
• 5
• 4
• 3
• 2
• 1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Aug-2013 Feb-2014 Aug-2014 Feb-2015 Aug-2015 Feb-2016 Aug-2016 Feb-2017 Aug-2017 Feb-2018 EPS Growth (%) 2016 2017 2018 2019 FY18 = +8.0%

24

Apr-2018

Source: Ausbil, CLSA, IBES.

Australian equity market

Broadening of earnings

• 15
• 14
• 13
• 12
• 11
• 10
• 9
• 8
• 7
• 6
• 5
• 4
• 3
• 2
• 1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Aug-2013 Feb-2014 Aug-2014 Feb-2015 Aug-2015 Feb-2016 Aug-2016 Feb-2017 Aug-2017 Feb-2018 EPS Growth (%) 2016 2017 2018 2019

25

Apr-2018

FY19 = +8.4%

Australian equity market

Valuation is not stretched

Source: Ausbil, Citi, Factset

• 12.6

12.5 8.0 8.4

4 8 12 16 20 24

• 40
• 20

20 40 60 80 100 120 1988 1992 1996 2000 2004 2008 2012 2016 Market EPS growth (lhs) PE ratio on one year forward EPS (rhs)

X

% yoy

Forecast 14.6

PE ratio average of low inflation era

26

April 2018

PE FY 2018 (f) X PE FY 2019 (f) X EPS Growth FY 2018 (f) % EPS Growth FY 2019 (f) % Ausbil* EPS Growth FY19 *(f) % MARKET 15.9 14.6 +8.0 +8.4 Financials 13.1 12.4 +1.2 +6.2 REITS 15.6 15.0 +3.9 +4.3 Industrials 19.7 17.8 +7.1 +10.7 Resources 15.5 13.9 +28.2 +11.0

Source: Ausbil, 26 April 2018 Note: * Ausbil view of earnings direction relative to consensus

Australian equity market

Consensus expectations for EPS growth and P/Es

27

Source: Ausbil, Deutsche Bank, IBES estimates

9x 14x

5 6 7 8 9 10 11 12 13 14 Average dispersion since 2003 between high vs low PE stocks Current dispersion between high vs low PE stocks 28

Now Average since 2003

Australian equity market

High PE stocks relatively expensive

Australian equity market

Volatility is creating opportunities

US and Australian equity volatility

Source: Factset, Ausbil

29

• Bond proxies
• Overseas earners
• Domestic consumer
• Resources and energy
• Banks
• Infrastructure activity

Market drivers for FY2019

Outlook for key sectors

30

Bond proxies

The bond rally is over

Source: Ausbil, UBS

31

100 200 300 400 500 600 700 Jan 2009 Oct 2009 Jul 2010 Apr 2011 Jan 2012 Oct 2012 Jul 2013 Apr 2014 Jan 2015 Oct 2015 Jul 2016 Apr 2017 Jan 2018 Infrastructure REITs Utilities ASX 200

Underweight

Bond proxies

The bond rally is over

Source: Goldman Sachs, Ausbil

Underweight 1 2 3 4 9 10 11 12 13 14 15 16 17 18 2009 2010 2011 2012 2013 2014 2015 2016 Av .forward P/E P/E (LHS) 15-Yr average (LHS) US 10yr (RHS)

32

Underweight Further Underweight

Source: Goldman Sachs, Ausbil

1 2 3 4 9 10 11 12 13 14 15 16 17 18

2009 2010 2011 2012 2013 2014 2015 2016 2017

Av .forward P/E P/E (LHS) 15-Yr average (LHS) US 10yr (RHS)

Bond proxies

The bond rally is over

33

Underweight Further Underweight Further Underweight

Source: Goldman Sachs, Ausbil Bond Proxy = REITs, Utilities, Telecommunication Services, Transportation Infrastructure

1 2 3 4 9 10 11 12 13 14 15 16 17 18 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Av .forward P/E P/E (LHS) 15-Yr average (LHS) US 10yr (RHS)

Bond proxies

The bond rally is over

2020

34

Source: Ausbil, Bloomberg, Factset

Offshore earners

Superior earnings delivers outperformance

35

Market

5% 61% 45% 39% 30% 22% 20% 11%

• 20%
• 30%
• 20%
• 10%

0% 10% 20% 30% 40% 50% 60% 70% Total return FY18 EPSg

Source: Ausbil, Bloomberg, Factset

Offshore earners

Superior earnings delivers outperformance

36

Market

5% 61% 45% 39% 30% 22% 20% 11%

• 20%
• 30%
• 20%
• 10%

0% 10% 20% 30% 40% 50% 60% 70% Total return FY18 EPSg FY19 EPSg

Source: Ausbil, Morgan Stanley

• 1

1 2 3 4 5 6 7 8 9

100 200 300 400 500 600 700 800 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Cost of living (LHS) Wage growth (%) (RHS) index

37

%

Domestic consumer

The pressure continues…

Domestic consumer

…discretionary consumption is falling

Source: Ausbil, Goldman Sachs

35% 36% 37% 38% 39% 40% 41% 42% 43% 44% 45% 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18

Share of total nominal consumption

Discretionary Consumption = Total Consumption less Food, Education, Health, Transport, Insurance and Rent

38

Domestic consumer

Household leverage remains a headwind

30 60 90 120 150 180 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Japan Euro Area United Kingdom Australia United States

Household debt to GDP

% of nominal GDP

Source: Ausbil, UBS

39

Domestic consumer

Household debt at all time high

Source: Ausbil, UBS *Latest UBS estimate

25 50 75 100 125 150 175 200 225 59 64 69 74 79 84 89 94 99 04 09 14 19 Household debt-income (LHS) Household debt-income: adjusted for mortgage offset accounts (LHS)*

%

40

Domestic consumer

Australian house prices are at risk

Source: Ausbil, UBS. *UBS latest estimate. UBS estimate of ratio of dwelling price to average household disposable income. **Banks owner-occupier discounted standard variable mortgage rates.

2 6 10 14 18 22 2 3 4 5 6 7 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 Dwelling price to income ratio (LHS)* Mortgage rate (RHS)**

Ratio

%

41

Source: Ausbil, Bloomberg

Resources – metals and mining

Commodities prices have bottomed

50 75 100 125 150 175 200 225 250 275 2001 2003 2005 2007 2009 2011 2013 2015

Bloomberg Commodity ex-Precious Metals Index

42

Source: Ausbil, Bloomberg

Resources – metals and mining

Commodities prices have bottomed

50 75 100 125 150 175 200 225 250 275 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Bloomberg Commodity ex-Precious Metals Index February 2016 to April 2018: +21% Ausbil Overweight Resources

43 2017 2018

Source: Ausbil, Bloomberg

Resources – metals and mining

Commodities prices have bottomed

44

100 105 110 115 120 125

February 2016 to April 2018: +21%

Source: Ausbil, Bloomberg

65% 70% 75% 80% 85% 720 780 840 900 960 1020 1080 1140 1200 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E

Mt

Steel capacity Utilisation rate (RHS)

45

Resources – metals and mining

Chinese capacity cuts supportive

Source: Ausbil, Fortescue Metals Group

46

Iron ore cost curve

Lower costs are boosting free cashflow

Iron ore cost curve

Lower costs are boosting free cashflow

Source: Ausbil, Fortescue Metals Group

47

6 5 5 2 5 12 12 16 17 15 24 27

• 7
• 4

21 15 15 35 29 26 25 29 15 $(10) $- $10 $20 $30 $40 $50 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Source: Ausbil, Bloomberg

Resources – metals and mining

Free cashflow is booming (BHP RIO FMG S32)

Negative Positive Forecast 48 Additional

A$ b

6 5 5 2 5 12 12 16 17 15 24 27

• 7
• 4

21 15 15 35 29 26 25 29 15 $(10) $- $10 $20 $30 $40 $50 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

A$ b

Source: Ausbil, Bloomberg

Resources – metals and mining

Free cashflow is booming (BHP RIO FMG S32)

A$159b A$146b A$40b 2000 – 2011 2012 - 2016 2017 - 2021

Negative Positive Forecast 49 Additional

20 40 60 80 100 120 140

• 4,100
• 4,000
• 3,900
• 3,800
• 3,700
• 3,600
• 3,500
• 3,400
• 3,300
• 3,200

Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Global oil inventory estimate (b bbl) (LHS) (inverse) Oil price

Global oil inventory estimates (b bbl) (inverse) Brent oil ($ / bbl)

Resources – energy

Global oil inventory drawdowns supporting oil prices

Source: Ausbil, Citi

50

Resources – energy Free cashflow is strong

• 1.5
• 0.9

0.3 0.7 0.9 1.0 1.0

• $2.0
• $1.5
• $1.0
• $0.5

$0.0 $0.5 $1.0 $1.5 2014 2015 2016 2017 2018 2019 2020

Negative Positive Forecast

Source: Ausbil, Bloomberg

51

A$ b

Source: Ausbil, Bloomberg

24% 25%

• 8%

6% 76% 4% 9% 20% 14% 111% 23% 13% 1%

• 2%
• 20%

0% 20% 40% 60% 80% 100% 120% Negative Positive 52

Resources – commodity prices

Spot prices higher than consensus…

Resources – commodity prices

…creating potential eps upside

Source: Ausbil, Bloomberg, Deutsche Bank

20 40 60 80 100 120 140 160 180 20 40 60 80 100 120 140 160 180 03 05 07 09 11 13 15 17 12m fwd eps relative to market Share price vs market Index Impact of spot prices

• n EPS

Index

Resources (metals & mining) + Energy relative to the market

53

Source: Ausbil

93 94 95 96 97 98 99 100 101 102

• 25
• 20
• 15
• 10
• 5

5 10 ASX 200 Banks vs Market (LHS) ASX 200 Banks EPS (RHS)

54

Bank sector

Earnings pressure, relative price weakness

Banks

What drives Bank earnings

Revenues (Loan volumes) Profitability (Return of Assets – ROA)

55

Source: Ausbil, UBS

5 10 15 20 25 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E System Housing Credit Growth Consensus (%)

• 5

5 10 15 20 25 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E (%)

56

Sector Revenue Growth (%) Consensus Consensus

Revenues

Lower credit growth = lower revenue growth

Profitability

Declining NIM and increasing BDD

Source: Ausbil

1.5 2.0 2.5 3.0 3.5 4.0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E

(%)

20 40 60 80 100 120 140 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E

57

Sector Net Interest Margin (%) Consensus Sector Bad and Doubtful Debts charge (bps) Consensus

bps

Bank sector

Lower revenues + lower profitability = lower earnings

• 15
• 10
• 5

5 10 15 20 25

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E (%)

58

Sector EPS growth (%) Consensus 10 12 14 16 18 20 22 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E (%) Sector Return on Equity (%) Consensus

Source: Ausbil, UBS

Domestic infrastructure

Significant pipeline of work and more coming

59

Source: Ausbil

Offshore earners Resources – metals and mining Resources – energy Infrastructure spend

60

Active Equity (large cap) strategy

Key portfolio themes and holdings

Offshore earners Resources – metals & mining Resources – energy Infrastructure spend

61

Emerging Leaders (ex 50) strategy

Key portfolio themes and holdings

• Synchronised global growth sustained by fiscal spend
• Interest rates and inflation higher
• FY2019 will deliver positive earnings growth
• Volatility is back and presents more opportunities for active managers

Summary

Key messages

62

May 2018 Mason Willoughby-Thomas Portfolio Manager, MicroCap Fund

Ausbil Investment Roadshow 2018

“Rising volatility - risks and opportunities”

Ausbil MicroCap Fund (ASX 200-300 bias)

Under-researched “sweet spot”

Fund Focus Traditional Small Cap Ausbil MicroCap Traditional MicroCap 100-200 bias 200-300 bias 300+ bias

64

• Wary of extreme earnings multiples – valuations matter
• Focus on companies with structural multi-year earnings drivers
• Strong quality focus – ROIC, cash flow, balance sheet, management
• Preference for organic over acquisition driven growth
• Target companies with large addressable markets

65

The microcap space

Key portfolio management considerations

• Small caps still offering a superior growth
• utlook vs larger peers for only a modest

PE premium.

• Macro conditions supportive
• Cost and availability of capital for fast

growing small caps still favourable

• Volatility rising
• Outlook positive for small caps – but you

need to pick your spots

0% 5% 10% 15% 20% 25%

FY18 FY19 FY20 CAGR

EPS Growth IBES Consensus

Small Ordinaries ASX200 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 FY18 FY19 FY20

PEG Ratio

Small Ordinaries ASX200 66

Valuation and EPS

The outlook for ex 200

• Resources (note: electric motor vehicle)
• Infrastructure activity
• Offshore earners
• Information Technology (including fintech)

67

Market drivers for FY2019

Outlook for sectors (ex 200)

• What they do: equity interests in two

production sharing contracts in China

• Why we like it: unique exposure to a

large and highly strategic natural gas resource at a time of rapidly escalating demand

• Outlook: Government approval and

project sanction (ODP) is due mid- CY18

$0.06 $0.08 $0.10 $0.12 $0.14 $0.16 $0.18 $0.20 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Jul 17 Oct 17 Jan 18

68

Resources

Sino Gas - strategic exposure to Chinese gas demand

$0.00 $0.05 $0.10 $0.15 $0.20 $0.25 $0.30 $0.35 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Jul 17 Oct 17 Jan 18 69

Infrastructure

Emeco - operational and financial turnaround

• What they do: heavy earth

equipment rental and maintenance

• Why we like it: exposure to the

resource and infrastructure sectors as well as an operational and financial turnaround

• Outlook: strong positive momentum

in utilisation and pricing to drive earnings revisions

$0.30 $0.40 $0.50 $0.60 $0.70 $0.80 $0.90 $1.00 $1.10 $1.20 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Jul 17 Oct 17 Jan 18

70

Offshore earner

Nearmap - unique exposure to a growth industry

• What they do: capture high

resolution aerial images using proprietary camera systems

• Why we like it: unique exposure to

an evolving and growing industry

• Outlook: embarking on a measured

expansion into the vast US market - scaling rapidly, progressing towards cash breakeven

Resources Infrastructure Offshore Earners Tech/IT Services/AI

71

Ausbil MicroCap (ex 200) strategy

Key portfolio themes and holdings

• Earnings outlook attractive and valuations are

relatively inexpensive

• Overall macroeconomic conditions remain

supportive

• Volatility is expected to continue to rise
• Certain sectors and stocks are under-researched

(“We unearth the unsung”)

• The environment will suit active management

72

The microcap (ex 200) space

Summary

Contactus@ ausbil.com.au

DISCLAIMER Important information for presentation recipients

The information contained in this presentation has been prepared for general use only and does not take into account your personal investment objectives, financial situation or particular needs. Before you make any decision about whether to invest in a financial product, you should obtain and consider the Product Disclosure Statement of the financial product. The information provided by Ausbil Investment Management Limited (ABN 26 076 316 473 AFSL 229722) has been done so in good faith and has been derived from sources believed to be accurate at the time of compilation. Changes in circumstances, including unlawful interference and unauthorised tampering, after the date of publication may impact on the accuracy of the information. Ausbil Investment Management Limited accepts no responsibility for any inaccuracy or for investment decisions or any other actions taken by any person on the basis of the information included. Past performance is not a reliable indicator of future performance. Ausbil Investment Management Limited does not guarantee the performance of the Funds, the repayment of capital or any particular rate of return. The performance of any unit trust depends on the performance of its underlying investment which can fall as well as rise and can result in both capital losses and gains. Consequently, due to market influences, no assurance can be given that all stated objectives will be achieved.