Fourth quarter 2017 update – Balmoral Fund

Our fund is doing very well. From Australia Day 2017 to 31 December 2017 our fund delivered gains of 12.73% which translates to an annualized return of 13.7% after fees. Although performance should be judged over multiple years we are to date outperforming the MSCI World Index by 2% after fees which I am very pleased with.

Companies owned

At end December 2017 we are collectively part-owners of 24 companies each chosen because of their balance sheet strength, consistent delivery of cash profit growth and the opportunity to purchase them at attractive prices.

Between 30 September and 30 December 2017 we purchased part ownership stakes in 10 new businesses:

1. The Cheesecake Factory – US casual dining restaurant with a proven business model and management team.

2. Gentex Corporation – US electro-optic technology business. Its best known product is automatic-dimming rear view mirrors.

3. Howden Joinery Group Plc – UK fitted kitchens business.

4. Headlam Group – UK wholesaler of floor coverings.

5. La-Z-Boy Incorporated – US furniture business.

6. Snap-On Inc – US tools and equipment business.

7. Jeronimo Martins -Portuguese supermarkets business which operates in Portugal, Poland and Colombia.

8. Avon Rubber – UK based business specialising in respiratory protection systems and dairy tubing.

9. Pandora – Danish jewellery business (which sells product in Australia).

10. Borregaard – Norwegian supplier of specialised biochemicals. Our other investments in the portfolio are below (we purchased more shares of some of these companies during the quarter):

11. Villeroy & Boch – German super premium porcelain.

12. Inwido – Swedish window and door manufacturer

13. Hugo Boss – German corporate and recently smart casual clothier

14. Prada – Italian high fashion house

15. Sartorius Stedim Biotech – French pharmaceutical and laboratory equipment supplier

16. DexCom – US blood glucose monitoring company

17. Norcros – UK bathroom products company

18. Kroger – US retailerDunelm – UK home furnishing retailer

19. Go-Ahead Group – UK mass transport operator

20. Tractor Supply Group – US rural products retailer

21. Herman Miller – US furniture company

22. Van De Velde – Belgian lingerie company

23. Knoll – US furniture company

Four positions were sold over the quarter:

1. US toy company Mattel was sold due to deteriorating sales results. Takeover speculation gave us the chance to exit at a minor profit.US beauty group

2. Coty gave us a total gain of a little over 5% over the year. It was sold due poor execution of the P&G brands acquisition as well as poor operating results.Canadian logistics business

3. CH Robinson Worldwide was sold due political risk for total gains around 16%.Netherlands chemical company

4. LyondellBasell Industries was sold for total gains around 24%. The position was a trading opportunity we entered due to it being so cheap.

Portfolio construction

As at end calendar 2017 our portfolio looks roughly as follows:

• 8% cash (mostly AUD and USD)

• 34% US companies

• 38% European companies

• 20% UK companies

As always if there are any questions please contact me at investor@balmoralassetmanagement.com.au

Regards

Angus