Element Global Opportunities Equity Portfolio

June 2012

The Element Global Opportunities Equity Portfolio has the mandate to go anywhere in pursuit of attractive investment opportunities, using a bottom-up investment approach. Being equity focused, the portfolio has at least 70% of its assets invested in international equity markets. The portfolio uses as benchmark the MSCI World (Local) but it does not seek to mimic or track this index in any way, which may lead both geographic and sectorial allocation differences.

Portfolio Details
Net Asset Value : Portfolio Assets (): Launch date: Portfolio Managers: 94.68 64000 14-January-2011 Filipe Alves da Silva, CAIA Afonso Janurio

Investment Highlights
Before 2008 real estate in Spain was booming. Cement consumption per capita was triple of either France or the US, as developers, willingly financed by banks, massively over constructed. As boom turned to bust, banks were faced with increasing non performing loans, consequence of falling real estate prices and a 24% unemployment rate. Spain was forced to nationalize its 4h largest bank and largest holder of real estate assets, Bankia, at a cost of 19bn, and officially asked the EU for money to help its struggling banking system. Quoting Mr. Buffett: only when the tide goes out do you discover who's been swimming naked. This is one of the reasons why we dont own banks, these days you just cannot take their balance sheet at face value. This impacts Telefnicas results, as it is facing soft demand on its home market and increasing financing costs. This month we initiated a position in Lowes, a home improvement and building material superstore in the US (think Leroy Merlin or AKI). The US housing market has been depressed for the past 5yrs, which depressed the companys profits, but the situation is normalizing and Lowes stands to profit from that process, both via revenue and margin expansion. The company is executing an aggressive buyback program, committing $ 4.5bn/yr until 2015 to buying back shares. This buyback will be fuelled by earnings and an increase in leverage, which is currently low. The number of shares they will buy will depend on the evolution of the share price until 2015. Ideally the price will remain low, making it possible for the company to acquire more shares than if the price was higher. After it is all said and done, the Lowes should buy back around half of its outstanding shares. The more they buy the happier will be!

Investment Guidelines
Max. Long Exposure: Min. Long Exposure: Equity Hedging: 130% 70% May use options on single name equities or equity indices to hedge downside risk Hedged on a best effort basis

Currency Hedging:

Management has put a target on 2015 EBIT margin of 10%, which compares with a 6.5% margin in 2011, and assume revenue growth of 4% per year. While we like management and would welcome these numbers, we prefer to be more conservative. We assume half of the growth in revenues and an EBIT margin of 8.3% for 2015. Assigning a conservative multiple of 13 times on 2015 earnings, which take into account the buyback, we get a target price around $ 34 (IRR of 10%). If we do the same calculation for managements targets the IRR rises to 21%.

Weekly Performance Chart

106 103 100
97 94 91 88

MSCI World Local

Portfolio

85 82 14-Jan 18-Feb 25-Mar 29-Apr 3-Jun 1-Jul 5-Aug 9-Sep 14-Oct 18-Nov 16-Dec 20-Jan 17-Feb 16-Mar 20-Apr 18-May 15-Jun

Monthly Performance
Jan 2011 2012 -1,11% 7,06% Feb 1,61% 5,19% Mar -2,05% 1,62% Apr 3,30% -0,86% May -1,25% -6,98% Jun -1,72% 2,62% Jul -1,37% Aug -7,23% Sep -7,20% Oct 8,70% Nov -2,83% Dec YTD -1,18% -12,57% 8,29%

Element Global Opportunities Equity Portfolio

Allocation by Sector
Cash Utilities Telecommunication Services 2,3% 0,9% 4,8% 4,7%

Allocation by Country
Cash Others Brazil China Netherlands Italy Sweden Spain Switzerland Germany Australia France Canada United Kingdom Japan United States
35%

2,3% 7,6% 1,4% 6,5% 0,2% 0,2% 0,3%

Materials
Health Care Consumer Staples Consumer Discretionary Energy Industrials Information Technology Financials 0%

6,6% 14,0%
19,8% 2,6% 2,6% 30,1% 11,3% 5% 10% 15% 20% 25% 30%

8,1%
0,9% 4,3% 0,9% 2,4% 4,9% 2,6% 2,2% 55,0% 0% 10% 20% 30% 40% 50% 60%

Top 10 Positions
i Sha res MSCI Worl d ETF Hedged Appl e Inc Mi cros oft Corpora ti on IBM Fi del i ty Chi na Speci a l Si tua ti ons Peps i Co Ama deus IT Hol di ngs Teva Pha rma ceuti ca l s Archer Da ni el s Mi dl a nds BMW

Weight
22,7% 7,1% 6,9% 6,2% 5,7% 5,6% 4,3% 3,9% 3,6% 3,5%
100% 80%
95,5%

Currency Exposure

60% 40% 20%

6,5%

1,4%

3,6%

0%
-20% EUR
-9,1%

0,3%

1,9%

Total

69,5%

USD

CNY

BRL

CAD

GBP

UAH

Glossary
Bottom-up Investing A bottom-up strategy overlooks broad sector and economic conditions and instead focuses on selecting a stock based on the individual attributes of a company. Advocates of the bottom-up approach simply seek strong companies with good prospects, regardless of industry or macroeconomic factors. Net Asset Value The total value of a companys assets less the total value of its liabilities is its net asset value (NAV). For valuation purposes it is common to divide net assets by the number of shares in issue to give the net assets per share, also known as the price per share. Long Exposure Percentage of the Portfolios assets that are invested in equity markets and that benefit from the appreciation of equity markets. Currency Hedging Transaction implemented to protect the Portfolios foreign currency positions (non-Euro) from an unwanted move in exchange rates. Top 10 Positions Top holdings are those securities in which the latest percentage of the Portfolios total assets are invested. They do not include hedging derivatives. A full list of holdings, including derivatives, is available upon request.
E L E M E N T C A P I T A L

Contacts
For more information please contact Afonso Janurio or Filipe Alves da Silva directly or send an email to element.cap@gmail.com

LONDON

GENEVA

Disclaimer: Past performance is not indicative of future performance. Reference in this document to specific securities should not be construed as a
recommendation to buy or sell these securities.

Element Global Opportunities Equity Portfolio

Complete List of Holdings

Name
iShares MSCI World ETF Hedged Apple Inc Microsoft Corporation IBM Fidelity China Special Situations PepsiCo Amadeus IT Holdings Teva Pharmaceuticals Archer Daniels Midlands BMW GAP Inc BlackRock Telefnica Berkshire Hathaway Corning Inc Avangard Jakks Pacific Lowe's Renault Energold Drilling MRV Engenharia IMAX Corporation Monument Mining OPAP Cninsure Telefonica 11 PUT 06/2013 Premier Exhibitions Addvantage Technologies Ted Baker Cash

Weight
22,7% 7,1% 6,9% 6,2% 5,7% 5,6% 4,3% 3,9% 3,6% 3,5% 3,4% 2,5% 2,5% 2,3% 2,1% 1,9% 1,7% 1,6% 1,5% 1,4% 1,4% 1,2% 1,0% 0,9% 0,8% 0,8% 0,6% 0,3% 0,3% 2,6% 100,0%

Total

Disclaimer: Past performance is not indicative of future performance. Reference in this document to specific securities should not be construed as a
recommendation to buy or sell these securities.