PACIFIC CURRENT GROUP LIMITED — Interim / Quarterly Report 2014

Feb 24, 2014

ASX announcement

Tuesday 25 February 2014

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Strong Interim Result, Dividend Increased

• NPAT up 12% (on H1 2013) to $6.8 million

• Solid growth in underlying NPAT of $7.2 million, up 30% on H1 2013

• Total FUM at $19.1 billion, up 13% on H1 2012 driven by strong performances from RARE, IML and Celeste

• Dividend up 35% to 23 cents per share

• Portfolio rationalisation – sale of TAAM, merger of Evergreen Capital, closure of Orion Australian equities

• Solid momentum expected to continue into 2H 2014

Treasury Group Limited (ASX:TRG, “Treasury” of “the Company”) is pleased to report the Company’s Half Year results for the six month period ending 31 December 2013.

Consolidated profit after tax (NPAT) totalled $6.76 million for the half, representing an increase of 12% on the prior corresponding period (H1 FY2013: $6.0 million). On an underlying basis, the Company’s profits were $7.2 million, representing an increase of 30% on H1 FY2013 ($5.5 million). The key drivers of profit growth were improved market conditions and strong performances from RARE Infrastructure (RARE), Investors Mutual Limited (IML) and Celeste Funds Management (Celeste).

Total Funds Under Management (FUM) at 31 December 2013 was $19.1 billion, an increase of $2.2 billion or 13% on H1 FY2013 ($17.0 billion). The aggregated net retail funds inflow from RARE, IML and Celeste for the six-month period ending 31 December 2013 totalled $385 million, compared to $204 million in H1 FY2013.

Retail funds inflow from RARE, IML and Celeste are driving net margins higher. Average net margin was 58 bps for H1 FY2014 (excluding Trilogy), compared to average net margin of 54 bps in H1 FY 2013.

Following the strong Interim Result, the Board has declared a fully franked interim dividend of $0.23 per share, which represents a 35% increase on the Interim Dividend paid in H1 FY2013 ($0.17 per share). The dividend increase reflects the Board’s confidence in the Company’s financial strength and positive operating outlook. The Record Date for the Interim Dividend is 6 March 2014 and the Payment Date is 27 March 2014.

Treasury Group Limited ABN: 39 006 708 792 Level 14, 39 Martin Place, Sydney NSW 2000

Phone +61 2 8243 0400

Facsimile +61 2 8243 0410

www.treasurygroup.com

Treasury Group’s Managing Director, Mr Andrew McGill commented:

“This was a pleasing result for the Company, led by strong contributions from RARE, IML and Celeste. FUM inflows from retail investors is driving higher average margins across our portfolio and increased profits.

“During the period, management was proactive in relation to management of TRG’s portfolio including in relation to the sale of TAAM, merger of Evergreen with Freehold Investment Management and restructure of Orion.

“The increase in the interim dividend reflects the growth in the underlying profitability of the business”.

A summary of the Profit and Loss for the six months ending 31 December 2013:

$000’s	H1 2014	H1 2013	**% Change **
Total Revenue	$1,030	$2,293	(55%)
EquityShare of Associates	$9,701	$7,404	31%
Expenses	($3,661)	($4,061)	10%
Net Profit After Tax	$6,762	$6,032	12%
UNDERLYING NET PROFIT	$7,209	$5,550	30%
Basic Earnings Per Share	29.27 cents	26.13 cents	12%
Dividend Per Share(cents)	23 cents	17 cents	35%

Note:

• (1) The above financials are reported to the nearest thousand whereas the percentage increase year on year is calculated on the actual results.

• (2) H1 2013 reflects full consolidation of GVI as well as fees from the corporate action in relation to Premium Investors Limited

• (3) Underlying profit excludes profits on sale of investments, settlement fee from PRV restructure (H1 2013) and other legal and restructuring costs.

For further details please contact:

Andrew McGill Managing Director, Treasury Group +61 2 8243 0400

For media queries please contact:

Rebecca Lawson

Investor and Media Relations Associate Director, Mercury Consulting 0432 398 122

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Treasury Group Limited

Interim Results presentation 31 December 2013

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Agenda

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1. Financial Highlights – 6 months ending 31 December 2013 2. Funds Under Management

2. Dividend

3. Outlook & Summary

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1. Financial Highlights

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Strong profit growth, driven by RARE, IML and Celeste

• NPAT up 12.1% (on H1 FY2013) to $6.8 million

• Solid growth in underlying profit – up 29.9% (on H1 FY2013) to $7.2 million

• Total FUM at 31 December 2013 – $19.1 billion, up $2.2 billion (or 12.7%) on H1 FY2013

• Strong performance across boutiques, particularly RARE, IML and Celeste:

• › Retail net funds inflow (aggregate) for RARE, IML and Celeste – $385m vs $204m (H1 FY2013)

• Ongoing efficiency and expense management at TRG

• Portfolio rationalisation – sale of TAAM and merger of Evergreen Capital

• Dividend of 23 cents per share, up 35.3% on H1 FY2013 (17 cents per share)

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1. Financial Highlights – growth in FUM; NPAT up 12.1%

P&L Highlights ($m)	H1- 2014	H1 -2013	% Change
				•	Growth in FUM of 12.7% due to
Half year end FUM ($bn)	19.1	17.0	12.7%		increased funds inflow at RARE, IML
Aggregate Boutique Mgmt Fee Income($m)	48.5	37.8	28.3%		and Celeste and market gains, partially offset by outflows at Orion
$million				•	Aggregate net retail fund inflows for
Revenue	1.0	2.3	-55.1%		RARE, IML and Celeste of $385m
Employee expenses	1.8	2.0	-8.1%	•	Comparative revenues impacted by the
Other expenses	1.8	2.1	-11.5%		one-off payment and management fee in
					relation to PRV (H1-2013)
Equity Share of Associates	9.7	7.4	31.0%	•	TRG Expenses down 12.2% due to cost
Gain on sale of investments	-	0.4	-100%		management
Net Profit Before Tax	7.1	6.0	17.2%	•	Dividend per share 35.3% higher
Income tax expense	0.3	-	100%	•	Net cash flow from operating activities
Net Profit After Tax	6.8	6.0	12.1%		up 21.2%
Underlying profit	7.2	5.5	29.9%	•	TRG holds cash of $14.0m at end of H1
					and carries no debt.
Basic Earnings Per Share	29.3	26.1	12.0%	•	Tax expense will be skewed to the
Dividend Per Share (cents)	23.0	17.0	35.3%		second half due mainly due to RARE
					Trust

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1. Financial Results – Underlying NPAT up 29.9%

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Treasury Group P&L ($000) H1- 2014 H1 -2013 % Change	• Residual goodwill in relation to AR capital written off • Consulting and legal costs in relation to the sale of TAAM, advisory work on projects
Profit After Tax 6,753.5 6,027.5 12.0%
Net gain on disposal of investments - (396.3) Settlement fee from PRV restructure - (500.0) Legal, consulting and restructuring costs 202.6 418.6 Impairment of goodwill 252.7 - Underlying Profit 7,208.9 5,549.8 29.9%

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1. Financial Results – Aggregate Profit & Loss of TRG Boutiques

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Aggregate P&L for Boutiques ($m)	H1- 2014	H1 - 2013	% change
Half year end FUM ($bn)	19.1	17.0	12.7%
Average Net Margin (%)	58 bpts	54 bpts	7.4%	•	Average net margin excludes
					Trilogy. It is increasing due to
Base Management Fees	49.4	37.8	30.7%		favourable change in mix
Other income	2.7	1.4	92.9%		(increased retail FUM).
Gross Profit	52.1	39.2	32.9%	•	TRG share of after tax profit
Employee expenses	13.1	10.0	31.0%		higher due to favourable
Other expenses	7.1	6.9	2.9%		change in mix (increase
					contribution from IML ,RARE
NPBT	30.2	22.3	35.4%
					and Celeste).
Income Tax	6.8	4.2	61.9%	•	Total cash held across the
NPAT	23.4	18.1	29.3%
TRG Share of After Tax Profit	9.7	7.4	31.1%		boutiques is $36.5 m (excl
					TRG)

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2. FUM - diversification across boutiques lowers risks

$19.1 billion FUM as at 31 December 2013

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Other TRG Boutiques,
3.8%
IML, 25.1%
Trilogy, 22.8%
Orion, 3.0%
Celeste, 4.0%
RARE, 41.3%
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2 . FUM – Diversification away from Australian equities continues, funds from retail investors is increasing

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FUM by Product Type

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FUM by Investor Type FUM by Investor Location
20 100%
20
18
18
16 16 80%
14 14
60%
12 12
10 10
40%
8 8
6 6
20%
4 4
2 2
0%
- - Dec-12 Dec-13
Alternatives
Institutional International Source
International Equities
Retail
Domestic Source
Australian Equities
$bn $bn
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. FUM
3
TRG Half Yearly Net New Funds Flow
$1,500 (Jan 2009 to Dec 2013)
$1,000 •
Inflows at RARE, IML
and Trilogy were offset
$500
by outflows at Orion.
$0
-$500
-$1,000
-$1,500
-$2,000
Note: Chart shows Net Flow, not change in FUM
$m
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4. FUM - growth at RARE and IML drives average margin higher

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25 Composition of FUM vs Average Margin 80
FUM Avg Margin
$bn (bps)
70
20
60 Trilogy
Freehold (Evergreen) & AR Capital
50
Celeste
15
TAAM
40
Aubrey & Global Value Investors
10 RARE Infrastructure
30
Orion
20 Investors Mutual
5
% incl Trilogy (RHS)
10 % excl Trilogy (RHS)
0 0
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5. Dividend – increase reflects growth in underlying profit

Dividend History

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45
40
35
30
25
cps
20
15
10
5
0
2009 2010 2011 2012 2013 2014
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• Interim dividend for FY2014 up 35.3% (on H1 FY2013) to 23 cents per share

• Balance sheet liquid and ungeared

• • Payout ratio of 79%

Interim Final

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6. Summary & Outlook

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• Solid underlying growth driven by improved market conditions, increased appetite from retail investors and investment performance from key boutiques

• Strong growth from IML & RARE offset by reduced contribution from Orion

• Shift in FUM towards retail funds boosts overall margin and profits

• Interim dividend up 35.3% from 17 cents per share to 23 cents per share

• Long term fundamentals for funds management remain attractive – Australian industry large and growing

• Significant investment in assessment of new deal opportunities, particularly international

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Disclaimer

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The information in this presentation is general background information about Treasury Group Limited and is current only at the date of this presentation. In particular, this presentation:

• is not an offer or recommendation to purchase or subscribe for securities in Treasury

• Group Limited, nor is it an invitation to any person to acquire securities in Treasury

Group;

• is not personal advice and does not take into account the potential and current individual investment objectives or the financial situation of investors; and

• contains information in summary form and does not purport to be complete.

Certain statements in this presentation may constitute “forward-looking” statements. Forward-looking statements are neither promises nor guarantees and involve known and unknown risks, uncertainties and other factors which may cause actual results to vary materially from any projection, future results or performance expressed or implied by such forward-looking statements.

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