Garnet International Equity Fund Series Quarterly Investment Report 31 March 2009 Investment approachThe core objective of the Garnet International Equity Fund Tier 1 applies a quantitative data set which assesses a
Series, comprising the Garnet UK Sterling Equity Fund and the broad universe of equities for profitability and balance sheet Garnet US Equity Fund, is to provide meaningful economic strength. If an individual equity passes this test, then it The country funds are discrete and separate entities. This Tier 2 applies our proprietary “Business Success Criteria®”.
allows investors to decide their preferred country and We systematically evaluate a business in terms of factors we currency exposure. The funds invest in the particular country have extensively researched, that – in combination – identify by reference to the manager’s proprietary two tier equity whether management and its strategy are effective or not.
We note that the businesses in both the UK and US Funds The portfolios are invested according to an equal weighting are well in excess of stated Tier 1 benchmarks for profit and philosophy and are therefore independent of market balance sheet strength and are therefore in a robust condition.
capitalisation and sector weighting biases. The result is a diversified portfolio of financially sound and well managed businesses. Over the long run we believe this produces The table below shows the performance for both the UK and long term out performance over the relevant country index.
US Funds. Being equity based, they are subject to the full effect of movements in the respective share markets. The UK We are not short term traders of investment positions.
Fund strongly outperformed its benchmark over the quarter whilst the US Fund modestly underperformed its benchmark To achieve a long term “edge” in performance, a unique two tier equity selection program is employed by the manager.
Garnet US Equity Fund
Mar quarter %
Since inception %2
Garnet UK Sterling Equity Fund Jan 09 %
Mar quarter %
Since inception %3
1 In $AUD 2 Inception date 3 December 2007 3 Inception date 1 October 2007 4 We note this figure does not include 30 June 2008 distribution of $0.01223 per unit Comment from Garnet Investment Management
Financial Markets and the Funds The FTSE All Shares index in
higher interest rate environment. We note the UK Fund strongly for credit. By early March, the above monetary policy measures, economies by approximately 30% during March and April from the UK and the S&P 500 index in the US both registered steep outperformed its benchmark whilst the US Fund modestly combined with targeted fiscal stimulus by many governments their decade lows in February, while welcome, has not been our declines in local currency terms over the quarter to March underperformed its benchmark over the quarter.
had some investors believing there were tentative signs of core focus. With the Funds long term investment philosophy we 2009 falling 9.08% and 11.01% respectively. The declines Economic snapshot As touched on above the first two months
improvement in underlying economic conditions. It must be noted have continued to look for lowly geared companies with a tight for the quarter can be attributed to the months of January and of this calendar year continued to be beset by the fear and that these improvements are at this stage sparse and generally business focus and sound strategy for navigating this current February with equity markets in March staging a strong recovery uncertainty created by the Lehman Brothers collapse in September more limited to a decrease in the rate of deterioration rather than crisis and beyond. We seek to purchase the cash flows of these as investors focused on possible “green shoots” identified in 2008. February provided data that much of the developed world businesses at reasonable prices with a view to holding for a financial and economic data (see below). The cross rates for was now officially in recession, satisfying the technical definition Looking forward Last quarter we mentioned the proper
minimum five year timeframe to benefit from a growing income the Australian Dollar (AUD) versus the British Pound (GBP) and of two consecutive quarters of negative GDP growth. While this functioning of credit markets as a precursor to any sustained stream. Though it is too early to fully judge the performance of US Dollar (USD) saw little net change over the quarter with the was widely expected it was the severity in which growth had economic recovery. News on this front, while by no means the Funds through this “once in a generation” financial crisis, USD rate depreciating 1% and the GBP rate remaining virtually slowed that surprised many. With inflation in developed countries conclusive, has been modestly positive. The health of the we take confidence from their more recent performance over the unchanged. This however masks the significant depreciation of showing signs of abating and unemployment beginning to pick world banking system remains at the core of a credit market last twelve months which has shown strong returns versus the the AUD versus these two currencies over January and February up speed, central banks, if they had not already, began to follow recovery. Bank “stress tests” in the US have provided some market as a whole. We have confidence the Funds, with their with an almost complete reversal in March. This trend in currency the lead of the US and reduce interest rates to historic lows of, at, reassurance that the probability of another Lehman’s is low, inherent lower risk characteristics, will provide meaningful long highly correlated with equity markets over the period reflecting or close to zero. Another historic move by the US and UK central though cannot be ruled out. We watch with interest whether this term returns to investors as we move into a more risk-averse Australia’s commodity currency status (and ties to our trading banks was to engage in “quantitative easing” (read printing of renewed optimism in the US banking system can be sustained environment in the foreseeable future.
partners) along with a return to riskier carry trade activity where money) to supplement low interest rates in an effort to boost and translated into increased credit growth into economically foreigner’s seek to take advantage of Australia’s relatively liquidity, ease the strain on debt holders and encourage demand viable activities. The rebound in equity markets of developed Garnet UK Sterling Equity Fund
Garnet US Equity Fund
Astrazenca Plc (UK)
Sysco Corp. (USA)
Sector: Healthcare – Major Drugs
Sector: Consumer Staples – Food and Staples Retailings
The business Astrazenca (LSE:AZN) is a world leading
The business A recent entry into the Garnet US Equity Fund
pharmaceutical company. The group focuses on portfolio, Sysco Corp. distributes and markets a range of discovery, development, manufacturing and marketing of food and related products primarily for the foodservice pharmaceuticals and biological products for important areas industry. Also supplying various non-food items, such as of healthcare including: Cardiovascular, Gastrointestinal, disposable napkins, tableware and cleaning supplies, Sysco Infection, Neuroscience, Oncology and Respiratory and Corp. operates 180 distribution facilities throughout the Inflammation. Their key products include Arimidex, Crestor, United States and Canada and has a market capitalisation in excess of USD $12 billion. With a strong focus on top- The financials Through growth in operating cash flow and
level strategy and attention to detail, containing costs and Total equities
significant reductions to net debt, Astrazenca’s performance investing in customers relationships has enabled Sysco Total equities
was resilient in 2008. Operating profit increased by 4% Corp. to achieve growth in a difficult economic environment and earnings per share increased by 12%. This translated characterised by high fuel costs and customers with Total number of equities
into a 10% increase in Astrazenca’s full year dividend. Total number of equities
Shareholders also benefited in 2008 from an improvement The financials With one of the largest private truck fleets in
in the company share price, increasing by 30% compared to the industry, Sysco Corp. felt the “pain at the pump” during FTSE All Shares Index
S&P 500 Index
the 31% decline of the FSTE 100 Index.
the 2008 fiscal year. Despite these rising costs challenging The future The pharmaceutical industry is arguably less
both the business and customers, Sysco Corp reported sales exposed than other sectors to the current global economic growth of USD $2.5 billion and a 10% increase in operating downturn, although some impact may result from increased income. These positive results flowed through to shareholders constraints on payers, suppliers and distributors. There is also in the form of increased income with the return of USD $1 growing pressure on healthcare costs, pricing and increased billion, in the form of dividends and share repurchases.
generic competition. Astrazenca has set a clear and defined The future Exploring the use of alternative energy sources as
strategy, with objectives to strengthen the pipeline and grow a means of addressing long-term energy costs, Sysco Corp the business through sales growth and new product launches. has adopted the use of biodiesel fuel where practicable Their strategy has proven its endurance to overcome barriers and investment in alternative truck refrigeration systems. in the past, and we continue to monitor its ability to provide Identifying investment in people, facilities, fleet and technology as the keys to gain market share and continue growth, Sysco Corp. expects investment of USD $675 million – $725million in capital spending during the 2009 fiscal year.
Fund details
NAV unit price at review date

Inception date
06 September 2007 (trading 01 October 2007) 15 November 2007 (trading 03 December 2007) Investment Manager
Suggested minimum investment time frame
Management costs
Standard Investment Fee: 1.5% p.a. of funds under management Performance fee
Performance Fee Investment Option: 0.95% p.a. of funds under management plus as alternative to Standard Fee
15% performance fee over designated benchmark Buy/Sell Spread
Minimum initial investment
Or a lesser amount in the Trustees absolute discretion and if the investor satisfies the definition of a wholesale client within the meaning of the Corporations Act Distributions
Annually at 30 June. Paid approximately 70 days after 30 June to either be reinvested into additional units or credited directly to your nominated bank account How to contact Garnet Investment Management

Prospective investors
Institutional investors
Mailing address
Garnet Investment Management, GPO Box 4369, Melbourne Victoria 3001 Past performance is not a reliable indicator of future performance. The returns on the Fund assume distributions are reinvested.
Investments in the Garnet UK Sterling Equity Fund (ABN 14 886 092 417) and Garnet US Equity Fund (ABN 25 271 908 065) (“Fund”) are offered by Garnet Investment Management Pty Ltd (ABN 125 614 459) (“Garnet”). This information is general advice only and has been prepared without taking into account the individual objectives, financial situation or needs of any particular investor. Before making a decision to invest in the Fund on the basis of this information, investors should read the Fund’s Information Memorandum (“IM”) and consider, with or without their financial advisor, whether it fits their objectives, financial situation and needs. Applications for units in the Fund can only be made on an application form contained in the current IM. Investments in the Fund are not deposits with or other liabilities of Garnet Investment Management Pty Ltd (ACN 125 614 459) or any Fordham Group company and are subject to investment risk, including possible delays in repayment and loss of income or principal invested. None of Garnet Investment Management Pty Ltd or any Fordham Group company guarantees the performance of the Fund of the repayment of capital from the Fund or any particular rate of return.
Investment Manager and Trustee Garnet Investment Management Pty Ltd ACN 125 614 459 AFS Licence Number 314 460 The liability of officers and employee members of the Institute of Chartered Accountants in Australia is limited by a scheme approved under Professional Standards Legislation.
Level 35, South Tower, Rialto Towers, 525 Collins Street, Melbourne Victoria 3000, Australia. GPO Box 4369, Melbourne Victoria 3001, Australia T. +61 3 9611 6700 E. [email protected] W. for offshore assets UBS AG, London Branch, 1 Curzon Street, London W1J5UB Auditors TAG Partners, Level 1, 1911 Malvern Road, Malvern Victoria 3145, Australia 2009 Fordham Nominees Pty Ltd. All rights reserved.



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