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TRIO+

Please Note: This fund is now closed

What do you get when you combine the strategies of the world's most successful investor with 2 global boom areas?

Just released: Research house Aegis says…
“Aegis regards Trio+ as an attractive and well-structured investment play. Capital growth is a function of three very distinct and potentially compelling underlying investments. Additionally, the different asset class exposure provides the potential to weather the current equities market environment (via agricultural commodities exposure) while participating in any future recovery in equities.”
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JPMorgan Trio+ targets top quartile performers with demonstrated track histories of outperforming their peers and innovative managers with investment processes that we believe will add value.

Seeking growth in 3 ways…

The Growth Component of Trio+ is made up of a dynamic exposure to the NYSE listed iShares MSCI Emerging Markets Index Fund (EEM US), Berkshire Hathaway Inc. (BRK/b US) and the JPMorgan Commodity Curve Agricultural Index (JMCXAGER Index).

1. Agricultural Commodities

The term 'Agflation' has been used frequently over recent times and refers to this global rise of agricultural commodity prices.

All around the world, food prices are rising. There are numerous reasons for this but one powerful combination deserves a mention... Large portions of the population are finding themselves in improved financial positions due to the economic development in emerging markets and the growing demand for renewal fuel sources like ethanol is also consuming commodities like sugar, wheat and corn.

Globalisation has succeeded in moving hundreds of millions out of subsistence living into a more secure standing. The demand for food for these people alone, without having to factor in the millions more joining them every year, is enough to fuel growth in agriculture. When we also consider the added complications of weather related events and the growing demand for biofuels, we can quickly comprehend some of the reasons for the current buzz surrounding agriculture.

To access this exciting growth area, part of the Growth Component of Trio+ will provide you with a dynamic exposure to the JPMorgan Commodity Curve Agricultural Index. This index is made up of 15 exchange-based agricultural commodities including Corn, Soybean, Wheat and Sugar.

2. Growing economies of global significance

The third area of the Growth component within Trio+ will invest in Emerging Markets through a dynamic exposure to the ishares MSCI Emerging Markets Fund. It will provide exposure to a broad range of sectors that are booming in emerging market economies. These include financials, materials, energy, information technology, telecommunication services, industrials and suppliers of consumer products. The MSCI Emerging Markets Index Fund is made up of more than 900 companies across 23 emerging market economies and has achieved an average return of 28.07% p.a.over the last 3 years¹.

Innovative growth investment and the potential for income

Trio+ provides a clear growth strategy that is focused on three growth opportunities as well as potential for income, generated from a dynamic exposure to two JPMorgan "rules-based" trading strategies (Yield Alpha 8 and Efficiente) that aim to derive returns while targeting low volatility.

Both income strategies are combined equally in a single basket to use diversification to make the volatility lower than the individual strategies applied alone. The income payments are capped at a maximum of 8% p.a. for the first 4 years, with any residual amount retained within the Income Component for future years' distributions. Any residual value remaining within the income component will be paid out in the final year.

3. A slice of Warren Buffett's portfolio

Berkshire Hathaway Inc. is the investment vehicle of the world's richest man, Warren E. Buffett. Berkshire Hathaway is a holding company owning subsidiaries that engage in a number of diverse business activities including property and casualty insurance and reinsurance, utilities and energy, finance, manufacturing, services and retailing.

A typical Berkshire Hathaway Annual Report stands in stark contrast to the expensive and visually appealing reports we've become accustomed to. Instead, Berkshire Hathaway lets its' results speak for themselves and you won't turn too many pages before you find the outstanding figures this company has become famous for. As early as page 3 of the Berkshire Hathaway online Annual Report for 2007 you will find a simple table that lists the annual growth of Berkshire Hathaway shares and the S&P 500 (inclusive of dividends) from 1965 – 2007. Scan down the page, and there it is… a 21.1% compounded annual gain over the 42 year period compared to the SP 500's 10.3%.

On the next page, Chairman Warren E. Buffett reports 'Our gain in net worth during 2007 was $12.3 billion, which increased the per-share book value of both our Class A and Class B stock by 11%. Over the last 43 years (that is, since present management took over) book value has grown from $19 to $78,008, a rate of 21.1% compounded annually².

What Drives This Money-making Machine?

There are two main areas of value in Berkshire Hathaway. First, there are stocks, bonds and cash equivalents (totalling $141 bn at the end of 2007). Berkshire's large interest in insurance businesses requires large cash reserves (floats). A certain amount of this money must be keep in cash style investments to support these businesses. Insurance float money that does not actually belong to the company but can be used to fund investments and as long as the insurance business continues to be profitable each year (as it has done under current management, this money is essentially "free". According to the 2007 Annual Report, $59 billion dollars of this money was funding investments.

The second major value component of Berkshire Hathaway is made up of the earnings that come from non-insurance investments - companies that range from jewellery to ice-cream, executive jet rental to furniture rental. Whilst there seems to be little similarity to the types of companies Berkshire owns, each one must fit with the…

Recipe for success

As the stewards of Berkshire, Warren Buffett and his partner Charlie Munger have long stood by their strict but simple acquisition criteria;

1. a business they understand;
2. favourable long-term economics;
3. able and trustworthy management; and
4. a sensible price tag

They like to purchase entire businesses but are happy to settle for shares in businesses they describe as 'great' too. Books have been written on Warren Buffett's investment philosophies and his definitions of what makes a great company.

Common-sense measurement delivers results

Buffett and Munger like their companies to have a "moat" or sustainable competitive advantage that cannot be eroded and when they are considering the success of each of their companies, they do so by two yardsticks that are held as gospel at Berkshire:

1. They want to see earnings up in a fair market environment; and
2. They want to see that the "moat" has widened, making it increasingly difficult for competitors to erode the business.

It is this straight-forward, unwavering approach to running Berkshire Hathaway that must be responsible for delivering an increased per-share book value of $77,989 over the 43 years Warren and Charlie have been in charge.

Berkshire does nothing rash but they don't miss much either. Currently, Buffett is actively taking advantage of new opportunities that have presented themselves following the debt debacle in the US³.

Trio+ will invest directly in Berkshire Hathaway B shares, allowing you to take part in the Berkshire success story in your portfolio.

Fund features summary

Up to 100% finance available

If you are interested in leveraging your investment in Trio+, approved applicants can borrow up to 100% of the investment amount.

Borrow to invest from just 8.50% p.a. fixed!

Geared Trio+ allows you to borrow up to 64% of the investment amount at just 8.50% p.a. fixed so investors who would find it beneficial to pre-pay interest can take advantage of this option.

Suitable for Self Managed Super Funds

Geared Trio+ utilises Installment Warrants that enable Self Managed Super Funds (SMSFs) to borrow to invest. Through Geared Trio+ SMSF's can borrow up to 64% of the investment amount and lock in the interest at a very reasonable 8.50% p.a.

Capital Protection at maturity

Trio+ provides capital protection at maturity.

Separate Growth & Income Components

The growth and income strategies are not linked to each other. This is beneficial because it should assist in balancing the overall performance of the investment.

Fully Hedged

Trio+ is fully hedged in Australian dollars at inception to reduce the risk of currency exposure

Profit Lock-Ins

Each year, 20% of any gain will be locked in and Capital Protected.

Offer Opens: 9.00am (AEST) 5 May 2008
Offer Closes: 5.00pm (AEST) 20 June 2008