aristotle/saul global opportunities fund...
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(844) 274-7868 | www.aristotlefunds.comLos Angeles | Newport Beach | Boston | New York
Quarterly Update
Aristotle/Saul Global Opportunities Fund (ARSOX)
December 31, 2016
Aristotle Capital Management, LLC 2
GLOBAL QUALITY
The companies listed on this slide comprise ALL holdings as of 12/31/2016. More details can be found in the 4Q16 shareholder letter which can be found on the www.aristotlefunds.com website or is available by request. This information should not be considered a recommendation to purchase or sell any particular security. Please see important disclosures at the end of this document.
We believe we can add value by conducting rigorous, independent, bottom-up fundamental analysis with a
global, long-term view to construct a focused, yet diversified portfolio of attractively valued, high-quality companies.
Aristotle Capital Management, LLC 3
ARISTOTLE CAPITAL OVERVIEW
3 essential factors we require in an investment
• Identify unique companies with strong or improving fundamentals, sustainable competitive advantages, market leadership, a strong financial position, etc.
• Seek out situations where something important is changing; new management, restructuring, industry consolidation, improving business mix, resolution of ancillary issues, etc.
• Apply an owner’s mentality that emphasizes absolute valuation by focusing on the normalized earnings power and cash flow of the business.
High Quality Attractive Valuation Compelling Catalysts/Misunderstanding
INVESTMENT EXAMPLE
Sources: Company annual reports, BloombergThe company identified above is an example of a holding and is subject to change without notice. The company has been selected to help illustrate the investment process described herein. A complete list of holdings is included in this presentation. This information should not be considered a recommendation to purchase or sell any particular security. Recommendations made in the last 12 months are available upon request. Please see important disclosures at the end of this document.
Vivendi • $24 billion market capitalization; French company• Founded in 1853• Global media content company with focus on global music industry
and European pay TV
As of December 31, 2016
• Own some of the most iconic labels and brands in music
• Scale advantages• Strong management team• Solid financial position
• Transformed from an indebted conglomerate to a net cash, growing media company
• Economics of music industry changing due to streaming
• Restructuring of French pay TV
• Short-termism• Core business (UMG and Canal)
has the potential to generate over $1.6b in free cash flow
• Other investments may be worth over $8b and the company has no debt
High Quality Attractive Valuation Compelling Catalysts
Aristotle Capital Management, LLC 4
INVESTMENT EXAMPLE
Martin Marietta Materials, Inc.• $14 billion market capitalization; U.S. materials company• Founded in 1961 (spun off from Lockheed Martin in 1996)• Construction aggregates-focused company; second-largest producer in U.S. • Focused on California, Colorado, Florida, Georgia, Iowa and Texas
As of December 31, 2016
Sources: Company annual reports, BloombergThe company identified above is an example of a holding and is subject to change without notice. The company has been selected to help illustrate the investment process described herein. A complete list of holdings is included in this presentation. This information should not be considered a recommendation to purchase or sell any particular security. Recommendations made in the last 12 months are available upon request. Please see important disclosures at the end of this document.
• High barriers to entry• Strong pricing power• Leading market share in most
markets• Well diversified by region and
customer base• Disciplined management team
• Operational improvements• Synergies from Texas Industries
acquisition• New highway bill approved
(provides funding certainty)• Continued industry consolidation
• Sector bias• Franchise has potential to annually
generate over $1.6 billion in pre-tax cash flow and over $16 per share in earnings
High Quality Attractive Valuation Compelling Catalysts
Aristotle Capital Management, LLC 5
INVESTMENT EXAMPLE
Sources: Company annual reports, BloombergThe company identified above is an example of a holding and is subject to change without notice. The company has been selected to help illustrate the investment process described herein. A complete list of holdings is included in this presentation. This information should not be considered a recommendation to purchase or sell any particular security. Recommendations made in the last 12 months are available upon request. Please see important disclosures at the end of this document.
Astellas Pharma, Inc.• $30 billion market capitalization; Japanese health care company• Established through merger of Yamanouchi and Fujisawa in 2005• Second-largest pharma company in Japan (by sales), with over 60% of
sales occurring outside of the country
As of December 31, 2016
• Well diversified by product and region
• Strong urology franchise• Innovative company • No financial leverage
• Expanding oncology franchise• Strong R&D pipeline • Continued margin expansion• Improving market share• Evolving Amgen partnership
• Country bias• Stable franchise with potential to
annually generate over $3 billion in pre-tax cash flow and over $2 billion in free cash flow
• Nearly $3 billion of cash on balance sheet; no debt
High Quality Attractive Valuation Compelling Catalysts
Aristotle Capital Management, LLC 6
Portfolio Purchases Portfolio Sales
FranceConsumer Discretionary
United StatesEnergy
MexicoConsumer Staples
SwedenIndustrials
SwitzerlandFinancials
FranceConsumer Discretionary
United KingdomConsumer Staples
NetherlandsConsumer Staples
JapanConsumer Staples
United KingdomGold Related
JapanTelecom Services
4Q 2016 PORTFOLIO ACTIVITY
More details can be found in the 4Q16 shareholder letter which can be found on the www.aristotlefunds.com website or is available by request. This is not a recommendation to buy or sell a particular security. There is no guarantee that these securities will be held in the portfolio at the time of your receipt of this report. Recommendations made in the last 12 months are available upon request. Please see important disclosures at the end of this document.
As of December 31, 2016
Aristotle Capital Management, LLC 7
Aristotle Capital Management, LLC 8
GLOBAL OPPORTUNITIES FUND (CLASS I: ARSOX)
Largest Holdings (%)
Astellas Pharma 4.1Microsoft 3.5Martin Marietta Materials 3.4Samsung Electronics 3.2Experian 3.0Danaher 2.9Peyto Exploration & Development 2.9Newcrest Mining 2.8Mondelēz International 2.7Cameco 2.7
Total 31.2
Fund Composition
As of December 31, 2016
U.S.Equity34.2%
DevelopedNon-U.S. Equity
41.8%
EmergingMarketsEquity7.1%
GoldRelated
5.2%
Cash11.7%
Characteristics
ARSOX MSCI ACWI Class I Index
Number of Equity Holdings 38 2,449Wtd. Average Market Cap ($B) 55.0 101.6Median Market Cap ($B) 18.4 9.0Active Share (%) 95.3 --Annualized Turnover (2 Yrs, %) 37.3 --
Portfolio Risk/Return Statistics
ARSOX MSCI ACWI 2 Years Class I Index (Net)
Beta 0.77 1.00Correlation 0.88 1.00Standard Deviation (%) 10.86 12.42Loss Deviation (%) 5.37 7.58Information Ratio 0.50 --Sortino Ratio 1.00 0.33
Sources: Advent, FactSet, MSCI, eVestmentPast performance is not indicative of future results. Holdings and allocations will change due to ongoing management of the Fund. This is not a recommendation to buy or sell a particular security. Recommendations made in the last 12 months are available upon request. Please see important disclosures at the end of this document.
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Sector Weights (%) Region Weights (%)
As of December 31, 2016
Sources: Advent, MSCIThe Aristotle/Saul Global Opportunities Fund’s sector and region weights are based on the Fund. Sectors are based on Standard & Poor's Global Industry Classification Standards (GICS).
GLOBAL OPPORTUNITIES FUND (CLASS I: ARSOX)
Aristotle Capital Management, LLC
ARSOX Class I MSCI ACWI Index
0.4
3.2
3.6
3.1
4.9
15.5
10.6
11.1
18.7
7.3
9.5
12.1
11.7
5.2
2.1
0.0
0.0
11.8
11.1
9.2
13.4
9.4
9.5
8.5
8.1
0 5 10 15 20
Cash & Accrued Income
Gold Related
Utilities
Telecommunication Services
Real Estate
Materials
Information Technology
Industrials
Health Care
Financials
Energy
Consumer Staples
Consumer Discretionary
0.4
3.0
53.8
10.5
3.9
7.8
5.9
14.7
11.7
5.2
6.5
34.2
7.1
1.5
10.8
1.3
21.7
0 10 20 30 40 50 60
Cash
Gold Related
Canada
United States
Emerging Markets
Developed Asia (ex Japan)
Japan
United Kingdom
Developed Europe (ex U.K.)
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HOLDINGS BY QUALITY CLASSIFICATION
Assa AbloyCie Financière RichemontDanaherDassault SystèmesExperianGivaudanLVMH Moet Hennessy Louis VuittonMedtronic MicrosoftMondelēz InternationalPayPal HoldingsSchlumbergerWalgreens Boots Alliance
Ameriprise FinancialAstellas PharmaBaxter InternationalErste Group BankKubotaKurita Water IndustriesLennarMartin Marietta MaterialsNational Fuel Gas PPG IndustriesSamsung Electronics Toray IndustriesVivendi
Agnico Eagle MinesBank of AmericaCamecoHypermarcasKimberly-Clark de MexicoKinder MorganNewcrest MiningPeyto Exploration & DevelopmentSandfire ResourcesStock Spirits GroupUBS GroupUranium Participation
Underappreciated Quality Overlooked Quality Out-of-Favor Quality
Positions added during the quarter are bolded.This is not a recommendation to buy or sell a particular security. There is no guarantee that these securities will be held in the portfolio at the time of your receipt of this report. Allocations are subject to change. Recommendations made in the last 12 months are available upon request. Please see important disclosures at the end of this document.
As of December 31, 2016
Aristotle Capital Management, LLC
Targeted market inefficiency:
Benchmark Fixation
Country Bias
Sector Bias
Short-termism
Country Bias
Sector Bias
Short-termismShort-termism
Sector Bias
Misunderstanding of Risk
Benchmark Fixation
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PORTFOLIO CHARACTERISTICS BY QUALITY CLASSIFICATION
Underappreciated Quality
Overlooked Quality
Out-of-Favor Quality
Sources: FactSet, Bloomberg*Fair Value is an internal estimate. **EBITDA is earnings before interest, taxes, depreciation and amortization and is a proxy for pre-tax cash flow.Past performance is not indicative of future results. Allocations are subject to change. Please see important disclosures at the end of this document.
As of December 31, 2016
Number of Holdings 13 13 12Percent of Portfolio Market Value 32 32 25
Wtd. Average Market Cap ($B) 90.1 29.3 32.3Average Net Debt/EBITDA** 0.5x 0.7x 1.3xReturn on Invested Capital (5 Yrs, %) 12 8 6
ValuationDiscount to Fair Value (%)* 17 25 33
StatisticsAverage Volatility (90 day, %) 20 27 32Average Correlation vs. MSCI ACWI (1 Yr) 0.66 0.62 0.39Average Beta vs. MSCI ACWI (1 Yr) 0.97 1.02 0.83
Aristotle Capital Management, LLC
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GLOBAL OPPORTUNITIES FUND (CLASS I: ARSOX)To
tal R
etur
n (%
)
1 YearQTD 2 Years 3 Years Since Inception(3/30/2012)
-5
0
5
10
15
ARSOX Class I MSCI ACWI Index (Net)
-0.01
1.19
13.60
7.86
5.53
2.62
7.30
4.77
3.13
1.03
As of December 31, 2016
Sources: Advent, MSCIPerformance data quoted here represent past performance. Past performance is no guarantee of future results. Investment return and principal value will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information quoted. To obtain performance information current to the most recent month-end, please call 1-844-274-7868.The Fund’s advisor has contractually agreed to waive certain fees and/or absorb expenses, through April 30, 2018, to the extent that the total annual operating expenses do not exceed 0.98% of average daily net assets of the Fund. The Fund’s advisor may seek reimbursement from the Fund for waived fees and/or expenses paid for three years from the date of the waiver or payment. Without these reductions, the Fund’s performance would have been lower. A redemption fee of 1.00% will be imposed on redemptions of shares within 30 days of purchase.Gross expense ratio is 1.42%. Net expense ratio is 0.99%. Aristotle Capital Management, LLC
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PERFORMANCE REVIEW
Performance data quoted here represent past performance. Past performance is no guarantee of future results. Investment return and principal value will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information quoted. To obtain performance information current to the most recent month-end, please call 1-844-274-7868.Sources: FactSet, BloombergA complete list of holdings is available upon request. This information should not be considered a recommendation to purchase or sell any particular security. Please see important disclosures at the end of this document.
As of December 31, 2016
Aristotle Capital Management, LLC
Avg. Weight
4Q16 4Q16
Avg. Weight 1
Year 1 YearU.S. 34.62% 2.10% 33.03% 6.22%Gold Related 5.57% -0.84% 7.50% 5.32%Europe/U.K. 18.45% -0.38% 18.67% 1.62%Emerging Markets 5.81% 0.34% 5.20% 1.34%Canada/Australia 7.85% 0.43% 8.80% 1.28%Fixed Income 0.01% 0.01% 0.03% -0.11%Japan 12.15% 0.30% 12.78% -0.93%Portfolio Contribution (Local) 1.96% 14.74%
Foreign Currency, gross -3.14% -0.14%Foreign Currency Hedges 1.41% 0.07%Currency Contribution, net* -1.73% -0.07%
Fees/Other -0.25% -1.07%Total Net Return -0.01% 13.60%
*Approximately 50% of developed markets currency exposure is systematically hedged through short-duration forward contracts.
Aristotle Capital Management, LLC 14
GLOBAL OPPORTUNITIES FUND (CLASS I: ARSOX)
Fund Investment ObjectiveThe Fund seeks to maximize long-term capital appreciation and income.
Fund Highlights• Flexible global mandate
- All-cap, all-country, equity-focused strategy
- Ability to allocate to cash, bonds and gold-related investments
• Disciplined and pragmatic approach
- Focused portfolio of what we believe to be unique companies
- We recognize that quality and value come in many different forms
• Well-diversified portfolio with an eye toward risk mitigation
- Our ambition is to not be exceedingly biased to any economic environment
Global | Equity | Flexible | Quality | Diversified
There can be no guarantee that any strategy (risk management or otherwise) will be successful. All investing involves risk, including the potential loss of principal.
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DISCLOSURES
The views in this report were as of the date stated and may not necessarily reflect the same views on the date this letter is first published or any time thereafter. These views are intended to help shareholders in understanding the Fund’s investment methodology and do not constitute investment advice.
Past performance is no guarantee of future results. Investment return and principal value will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
An investment in the Fund is subject to risks and you could lose money on your investment in the Fund. The principal risks of investing in the Fund include, but are not limited to, investing in foreign securities, emerging markets, short sales, derivatives, below investment grade bonds, convertible securities and ETFs.
Foreign securities have additional risks, including currency rate changes, political and economic instability, lack of comprehensive company information, less market liquidity, less efficient trading markets, and differing auditing controls and legal standards.
Investments in emerging markets involve even greater risks. The use of short sales and ETFs may cause the Fund to have higher expenses than those of other equity funds. Short sales are speculative transactions and involve special risks, including a greater reliance on the investment team’s ability to accurately anticipate the future value of a security. The Fund’s losses are potentially unlimited in a short sale transaction. The Fund’s use of short sales and futures contracts leverages the Fund’s portfolio. The Fund’s use of leverage can make the Fund more volatile and magnify the effect of any losses. There is no assurance that a leveraging strategy will be successful.
The Fund may invest in derivatives, which can be highly volatile, illiquid, difficult to value, and changes in the value of a derivative may not correlate with the underlying securities or other securities held directly by the Fund. Such risks include gains or losses which, as a result of leverage, can be substantially greater than the derivatives’ original cost. There is also a possibility that derivatives may not perform as intended, which can reduce opportunity for gain or result in losses by offsetting positive returns in other securities the Fund owns.
Please consider the Fund’s investment objectives, risks, charges and expenses carefully before investing. The prospectus or summary prospectus that contains this and other information about the Fund is available by calling 1-844-274-7868 or by visiting aristotlefunds.com and should be read carefully prior to investing.
Aristotle Capital Management, LLC
16
DISCLOSURES
The Aristotle/Saul Global Opportunities Fund is distributed by IMST Distributors, LLC.
The MSCI All Country World Index (ACWI) captures large and mid cap representation across 23 Developed Markets and 21 Emerging Markets countries. With over 2,400 constituents, the index covers approximately 85% of the global investable equity opportunity set. The volatility (beta) of the account may be greater or less than the benchmark. An investor cannot invest directly in this index.
Effective January 17, 2014, Aristotle/Saul Opportunity Fund has been renamed Aristotle/Saul Global Opportunities Fund. In addition, the Fund’s investment strategy has been updated.
Portfolio composition will change due to ongoing management of the Fund. References to specific securities or sectors should not be construed as recommendations by the Fund, its Advisor or Distributor.
As of December 31, 2016, the Fund’s holdings and their weights as a percent of total net assets were: Agnico Eagle Mines, Ltd., 2.38%; Ameriprise Financial, Inc., 2.47%; Assa Abloy AB-B, 1.98%; Astellas Pharma, Inc., 4.08%; Bank of America Corp., 2.41%; Baxter International, Inc., 2.00%; Cameco Corp., 2.66%; Centamin plc, 0.00%; Compagnie Financière Richemont, 1.45%; Danaher Corp., 2.95%; Dassault Systèmes S.A., 2.32%; Diageo plc, 0.00%; Erste Group Bank AG, 1.61%; Experian plc, 3.03%; Givaudan S.A., 2.27%; Hypermarcas S.A., 1.80%; KDDI Corp., 0.00%; Kimberly-Clark de México, 2.09; Kinder Morgan, Inc., 1.87%; Kubota Corp., 2.39%; Kurita Water Industries, Ltd., 1.84%; Lennar Corp., 2.01%; LVMH Moet Hennessy Louis Vuitton, 2.61%; Martin Marietta Materials, Inc. 3.37%; Medtronic plc, 2.54%; Microsoft Corp., 3.51%; Mondelēz International Inc., 2.68%; National Fuel Gas Company, 2.06%; Newcrest Mining, Ltd., 2.78%; PayPal Holdings, Inc., 2.06%; Peyto Exploration & Development Corp., 2.87%; PPG Industries, Inc., 2.26%; Samsung Electronics, 3.25%; Sandfire Resources NL, 1.47%; Schlumberger Ltd., 2.14%; Stock Spirits Group plc, 1.34%; Toray Industries, Inc., 2.44%; Toyo Suisan Kaisha, Ltd., 0.00%; UBS Group AG, 1.90%; Unilever N.V., 0.00%; Uranium Participation Corp., 0.98%; Vivendi S.A., 1.98%; Walgreens Boots Alliance, Inc., 2.43%.
Portfolio composition will change due to ongoing management of the Fund. References to specific securities or sectors should not be construed as recommendations by the Fund, its Advisor or Distributor.
ACML-17-043
Aristotle Capital Management, LLC