Quarterly reports - WIOF Global Listed Utilities Fund

1 Performance is calculated on I class shares, pre management fees of between 1.50% and 2.25% per annum 2 Performance inception date is 31 July 2009 3 The UBS Developed Infrastructure & Utilities Index is a USD hedged, total return index

IMPORTANT NOTES This report has been prepared for information only, and it does not represent an offer to purchase or subscribe for shares. While Nucleus Global Investors Pty Ltd (“Nucleus”) believes that the information is correct at the date of production, no warranty or representation is given to this effect and no liability can be assumed for the correctness or accuracy of the given information, which may be subject to change at any time, without notice. Returns can be volatile, reflecting increases and decreases in the value of underlying investments. Changes in market conditions and exchange rates can cause a decrease or an increase in the share value. Past performance does not guarantee the same results in the future. The WIOF Global Listed Utilities Fund (the “Fund”) is a sub fund of World Investment Opportunities Funds (the “SICAV”), an open-ended investment company registered on the official list of collective investment undertakings pursuant to part I of the Luxembourg law of 20th December 2002 on collective investment undertakings (the “2002 Law”). Julius Baer (Luxembourg) S.A is the designated management company of the SICAV, authorised under the provisions of Chapter 13 of the 2002 Law. Applications can only be made on the form in the current WIOF Prospectus dated April 2010. Prospectus can be obtained by contacting the Nucleus investment team on +61 2 9356 2866, by fax +61 2 9357 6640, or by emailing [email protected] or at http://www.wiof.eu/institutional/download/prospectus/. Before investing in the Fund, investors should contact their financial adviser and refer to all relevant documents relating to the Fund, such as the latest annual report and prospectus, which specify the particular risks associated with the Fund, together with any specific restrictions applying, and the basis of dealing. In the event an investor chooses not to seek advice from a financial adviser, he should consider whether the Fund is a suitable investment for him.

WIOF Global Listed Utilities Fund – December 2011 Performance Summary (total return before fees) Performance 1 1 Month 3 Months 12 Months Inception 2 WIOF Global Listed Utilities Fund 1.8% 3.6% 6.6% 23.3% Benchmark (UBS Developed Infrastructure & Utilities Index 3) 1.3% 4.7% 1.2% 16.3%

Overview

The fund’s share price increased by 3.6% over the quarter, compared to a 4.7% increase in our benchmark index. Equity markets had a good quarter, driven primarily by optimism about the US economy, which is growing faster than most economists had predicted. The better economic performance has been driven primarily by stronger consumer spending, as US consumers have become more confident about the prospects for the US economy and unemployment levels continue to fall. The S&P 500 rose by 11.2%, dragging most European markets with it - the FTSE 350 rose by 7.9% and Germany’s DAX increased by 7.2%. Equities were flat in Italy and Spain though as markets continued to worry about the possibility of sovereign default and the associated impact this would have on the European banking sector.

The underperformance of the fund over the quarter was due to stock selection, specifically the fact that the fund did not hold positions in El Paso Corp, The Williams Companies or ONEOK Inc, which together account for approximately 4% of our benchmark index. All three companies are integrated gas producers and distributors who own and operate both gas exploration and production businesses and large pipeline networks in the United States. During the quarter, Kinder Morgan (a leading pipeline transportation and energy storage company in North America) made a takeover bid for El Paso at a premium of almost 50% to its pre bid share price. This also drove up the price of The Williams Companies and ONEOK Inc, which were both seen as being ‘in play’ after the bid. The share price of both companies rose by over 30% in response. The fund did not own stakes in any of these companies due to the fact that they derive a large part of their income from gas exploration and production, which can exhibit very volatile earnings and which we don’t consider as a utility or infrastructure business.

The best performing stocks in the fund over the quarter were all US electricity utilities - Idacorp +13.1%, Xcel Energy +13.0% and Ameren Corp +12.6%. The worst performing were Inmarsat (a global satellite operator) -15.7%, CLP Holdings (a Hong Kong electricity utility) -5.7% and Osaka Gas Co (a gas utility) -5.6%.

Portfolio Changes

During the quarter, we established positions in Atmos Energy Corp, Northeast Utilities, Tokyo Gas Co and Xcel Energy. We exited positions in E.On, Flughafen Wien, Fortum, and Cleco Corp.

Outlook

Whilst the ECB’s provision of EUR 500 Bn in liquidity to just over 500 European banks in December has reduced the probability of a banking crisis, Europe’s banks are not out of the woods yet. According to the European Banking Authority, the continent’s banks need to raise at least EUR 115 Bn by June 2012 in order to comply with their minimum core tier one capital ratio requirements. We think the EBA’s estimate is hopelessly optimistic and the true amount needed to cope with the looming sovereign debt problems is more like three to five times this amount. Not only are banks keen to avoid the earnings dilution associated with having to raise large amounts of equity at big discounts to their already depressed share prices, they aren’t finding the capital easy to raise. Many appear to have taken the view that they are happy to shrink their balance sheets to minimise the amount they have to raise, meaning European credit markets will likely remain tight for some time. This does not bode well for growth in the region. Whilst most of Europe looks to be sliding into recession, across the Atlantic the news is far better. The US economy continues to grow steadily and importantly, employment continues to grow which in turn supports consumer spending. Even the much maligned housing market appears to be showing signs of bottoming. We expect the US economy to continue to outperform that of the Eurozone in 2012 and think it likely the fund will continue to maintain an overweight position in the US for some time. The fund also holds an overweight position in regulated utilities. We think 2012 is likely to be a tough year for the world economy generally and in addition to being quite attractive value, earnings for regulated utilities tend to hold up well even in poor economic conditions.

Regulated Utility57%

Semi Regulated Utility29%

Communications Infrastructure

6%

Rail3%

Cash5%

Sector Allocation

US57%

Europe ex UK4%

UK11%

Japan9%

Asia excl. Japan7%

Canada6%

Cash5%

Geographic Allocation

Company Name Country Sector% of

Portfolio

National Grid PLC UK Regulated Utility 5.5%

Consolidated Edison Inc US Regulated Utility 5.1%

Duke Energy Corp US Regulated Utility 4.6%

SES Luxembourg Communications Infrastructure 4.0%

Scottish & Southern Energy UK Semi Regulated Utility 4.0%

Top 5 Holdings



WIOF Global Listed Utilities Fund – September 2011 Performance Summary (total return before fees) Performance 1 1 Month 3 Months 12 Months Inception 2 WIOF Global Listed Utilities Fund 0.2% (0.3%) 5.7% 18.3% Benchmark (UBS Developed Infrastructure & Utilities Index 3) (0.6%) (6.0%) 0.0% 11.0%

Overview

The fund’s share price decreased by 0.3% over the quarter, compared to a 6.0% decrease in our benchmark index. Equity markets had a horrible quarter as markets became increasingly worried about the ability of the European banking sector to deal with potential sovereign defaults and writedowns of not just Greek, but also Italian and Spanish sovereign debt. Continental European markets were particularly badly hit with equity markets in Germany, France and Italy all falling by just over 25%, In contrast, the UK’s FTSE 350 and the S&P 500 each fell by “only” 14%. Markets are clearly pricing in a recession in Europe and a sharp slowdown in the US economy and are also clearly worried about the possibility that a GFC mark II is sparked by Europe’s sovereign debt crisis.

The outperformance of the fund was due to stock selection (not owning the large integrated utilities in Italy, Spain and France which make up a significant part of our investment universe) and geographic allocation. We sold our small positions in Italian utilities early in the quarter and our French holdings mid quarter, as the interest rates paid by Italy on its sovereign debt rose sharply, greatly impairing the ability of the government to service its large debt burden and increasing the probability of default. An Italian default would hurt not only the Italian economy, but also the French economy, given the impact it would have on the French banking sector which holds large amounts of Italian sovereign debt.

The best performing stocks in the fund over the quarter were Consolidated Edison (a US electricity utility) +8.2%, Central Japan Railway (operator of the Tokyo-Osaka high speed rail link) +7.8% and Duke Energy (a US electricity utility) +7.6%. The worst performing were E.On (a pan European electricity and gas utility) -16.5%, Inmarsat (a global satellite operator) -11.6% and Fortum (a Finnish power generator) -11.4%.

Portfolio Changes

During the quarter, we established positions in Southern Company, CLP Holdings, TransCanada, AGL Resources, SES and RWE. We exited positions in Iren, Enel, Vinci, GDF Suez and Drax.

Outlook

The probability of a European banking crisis has clearly increased. Europe’s banks are woefully under capitalised. If proof of this was needed, the collapse of Dexia (one of the highest rated banks under the recent European Banking Authority stress tests) has provided it. It is widely acknowledged that a recapitalisation of Europe’s banking sector is needed, the problem is where the capital will come from. Policy makers estimates of a total cost of EUR 100 Bn to bail out Europe’s banks is way too optimistic. It cost USD 700 Bn (EUR 500 Bn) to bail out the US banking sector (USD 300 Bn in equity injections and USD 400 Bn in asset guarantees), which serves a similar sized economy to the Eurozone banks. US banks, however, were much less leveraged when the sub prime crisis hit than European banks are now and we believe the total cost of a Eurozone banking sector bailout is likely to be between EUR 200 Bn and EUR 500 Bn and possibly even more. Furthermore, Eurozone governments would probably find it more difficult than the US government to raise the capital for a bailout. The Eurozone has basically two options to fund a bailout: the ECB prints money or individual member states issue bonds. Germany will certainly oppose large scale money printing given their experience of hyperinflation caused by printing money during the Weimar Republic and bond markets would likely balk at lending Italy or Spain (15% and 10% of the Eurozone respectively) their share of the funding necessary to effect a co-operative Eurozone bailout. A Eurobond guaranteed by all of the Eurozone members (in essence a bond guaranteed by Germany) looks to be an unlikely saviour. Even if it wanted to, could Germany actually afford to bail out the entire Eurozone? Germany’s economy represents around 25% of the Eurozone. Asking them to guarantee a bailout for the entire Eurozone is akin to asking California and New York (which together represent around 22% of the US economy) to bail out the entire US banking system. Should a banking crisis occur, our view is that national governments will bail out their own banks. Consequently, we have limited our exposure in Europe to those countries where we are confident the government could afford to bailout its banking system should this be required.



Generation2%


7%

Rail3%

Airports1%

Cash8%

Sector Allocation

US46%

Europe ex UK16%

UK12%

Japan7%

Asia excl. Japan6%

Canada6%

Cash8%



PortfolioE.ON AG Germany Semi Regulated Utility 5.5% Consolidated Edison Inc US Regulated Utility 5.3% National Grid PLC UK Regulated Utility 5.3% Scottish & Southern Energy UK Semi Regulated Utility 4.6% SES Luxembourg Communications Infrastructure 3.9%

Top 5 Holdings



WIOF Global Listed Utilities Fund – June 2011

Performance Summary (total return before fees) Performance 1 1 Month 3 Months 12 Months Inception 2 WIOF Global Listed Utilities Fund (0.9%) 0.6% 14.1% 18.7% Benchmark (UBS Developed Infrastructure & Utilities Index 3) (0.2%) 1.6% 13.9% 18.1%

Overview The fund’s share price decreased by 0.9% over the quarter, compared to a 0.2% decrease in our benchmark index. Whilst markets were generally relatively flat over the quarter, sovereign debt concerns weighed on markets in southern Europe. Whilst the S&P 500 was down by 0.4% over the quarter and the FTSE 350, was up by 0.9%, the Spanish equity market fell by 2.7% and the Italian market by 6.9%. Bank stocks were particularly hard hit in both Italy and Spain as markets became concerned about their exposure to sovereign debt in Italy and Spain respectively. The spreads on Spanish and Italian bonds over German bunds are now at their highest level since Spain and Italy entered the Eurozone - markets clearly doubt the debt crisis will be limited to Greece, Ireland and Portugal. The underperformance of the fund was primarily due to stock selection. Fortum (a nuclear and hydro electric power generator in Finland) fell by 13.1% as the Finnish government announced an excess profits tax on the profits Fortum makes from selling surplus CO2 emissions permits. Electric Power Development Co (a Japanese power generator operating hydro, gas and coal fired plants) fell by 15.1% as the Fukushima related negative sentiment surrounding Japanese nuclear power generators continued to drag down the whole power generation sector, including companies with no nuclear power exposure. The fund continued to benefit from the fact that it has no exposure to nuclear power in Japan. It also benefited from its holding in Drax (a UK based coal fired power generator), which rose by 32.7%. Because Europe’s power markets are highly interconnected, a shortage of power in France caused by the shut down of nuclear plants in Germany, is in turn causing power shortages and higher power prices in the UK which are benefiting Drax. The best performing stocks in the fund over the quarter were Drax +32.7%, First Energy (a US electricity utility) +20.5% and Power Assets Holdings (a Hong Kong electricity utility) +16.3%. The worst performing were Flughafen Wien (Vienna Airport) -17.7%, Electric Power Development Co -15.1% and Fortum -13.1%. Portfolio Changes During the quarter, we established positions in First Energy, Avista Corp, DPL Inc, Exelon, Atmos Energy Corp and Westshore Terminals. We exited positions in Electric Power Development Co, Flughafen Wien, Northumbrian Water, Enagas, Iberdrola and Xcel Energy.

Outlook We have become increasingly concerned in recent months about the sovereign debt crisis unfolding in Europe. With the sovereign debt of Greece and Portugal now downgraded to junk debt status, the question has to be asked, which other economies in Europe are vulnerable? Judging by the sharp rise in bond yields in Spain and Italy, markets are clearly worried about their credit worthiness also. Eurozone politicians are in denial about the scale of the problem and their proposed solutions are merely deferring the hard decisions to another day, rather than addressing the problem – that these countries cannot repay their debts and bondholders will have to take a haircut. At some point bond markets will make the hard decisions for them and force debt restructurings by simply refusing to extend credit. Sovereign indebtedness is not only a European problem however. Most western governments have too much debt and bond markets are demanding higher interest rates to lend to them and in some cases are becoming unwilling to buy their bonds. The result is that governments are being forced to cut spending and raise taxes, which will significantly cut incomes of both the corporate and household sector – which is itself already reducing spending as consumers begin to reduce the large debt burdens racked up in the credit boom. Periods of deleveraging that follow the bursting of a credit bubble are almost invariably characterized by low economic growth for exactly these reasons and we expect the next few years will be no different. Sectors of the economy that depend on consumer discretionary spending tend to fare particularly badly. In contrast, utilities tend to outperform in such an environment as they provide society’s essential services – people simply can’t live without power, gas or water - resulting in much more stable earnings in a weak economic environment.



Generation8%


3%

Toll Roads3%

Rail2% Ports 2%

Cash7%

Sector Allocation

US48%

Europe ex UK17%

UK14%

Japan6%

Asia excl. Japan2%

Canada6%

Cash7%



Portfolio


Scottish & Southern Energy UK Semi Regulated Utility 4.2%

Atco Ltd Canada Semi Regulated Utility 3.9%

Drax Group UK Generation 3.8%

Fortum OYJ Finland Generation 3.6%

Top 5 Holdings



WIOF Global Listed Utilities Fund – March 2011

Performance Summary (total return before fees) Performance 1 1 Month 3 Months 12 Months Inception 2 WIOF Global Listed Utilities Fund 0.7% 2.4% 5.5% 17.9% Benchmark (UBS Developed Infrastructure & Utilities Index 3) (3.1%) 1.2% 4.9% 16.3%

Sector Allocation



Cash1%

Generation11%

Toll Roads5%

Airports2%

Rail2%


3%


US46%

Europe ex UK21%

UK14%

Asia excl. Japan4%

Cash1%

Canada6%

Japan8%

Overview The fund’s share price increased by 2.4% over the quarter, compared to a 1.2% increase in our benchmark index. The nuclear crisis in Japan cast a shadow over world equity markets during March. Whilst the earthquake and tsunami caused a huge amount of damage in their own right, equity markets were far more concerned with the radiation emissions from the Fukushima nuclear plant. The Nikkei fell by 4.6% over the quarter, not a bad performance considering the extent of the damage to Japan’s economy caused by the disaster. The S&P500 rose by 5.4%, the FTSE 350 was flat and continental European markets were generally strong. The outperformance of the fund was driven by three factors: the fund had no holding in Tokyo Electric Power - the owner of the Fukushima plant (whose share price fell by 78%); an underweight position in Japanese equities – which we felt were relatively expensive before the crisis; and an underweight position in utilities with nuclear generation capacity in Europe - as we were concerned by the political uncertainty surrounding nuclear generation in Europe and in Germany in particular. We have never considered Tokyo Electric Power as an appropriate holding for the fund. As we noted in our September 2010 Quarterly Report, “the company has a record of systematic concealment from Japan’s nuclear authorities of safety incidents at its reactors stretching over decades. This alone should be enough to make any investor avoid holding any shares in the company.” The best performing stocks in the fund over the quarter were Verbund AG (an Austrian hydro electric generator) +12.4%, American Water Works Co Inc (a US water utility) +11.8% and Portland General Electric (a US electricity utility) +10.7%. The worst performing stocks were Flughafen Wien AG (Vienna Airport) -12.6%, Inmarsat (a satellite operator) -10.3% and Central Japan Railway Co (operator of the high speed rail link between Tokyo and Osaka) -2.4%. Portfolio Changes During the quarter, we established positions in Verbund AG, Drax Group, Electric Power Development Co, Okinawa Electric Power Co and Scottish & Southern Energy. We exited positions in E.On, SES, Vopak, Centrica and Southern Co.


Portfolio


Sempra Energy US Semi Regulated Utility 4.7%

Vinci France Toll Roads 4.5%


GDF Suez France Semi Regulated Utility 3.8%

Top 5 Holdings

Outlook The Fukushima plant represents about 6% of Japan’s electricity generation capacity. The power shortages caused by the plant shutdown has resulted in temporary shutdowns of a large number of factories. In addition to the lost output from the Fukushima plant, other nuclear plants in Japan are likely to see temporary closures for safety tests. Power shortages will result in excess profits for generators with non-nuclear capacity for many years, until the destroyed capacity is rebuilt. The Fukushima crisis will doubtless have impacts far beyond Japan. In Germany, Chancellor Merkel has ordered the temporary closure of seven of the countries seventeen nuclear plants while a safety review takes place. This drastic action was not enough to stop Germany’s Green party scoring their best ever state election result in this quarter’s Baden-Württemberg state election, with the Greens doubling their share of the primary vote to 24%. They will now form a coalition government with the SPD, with Green’s leader Winfried Kretschmann the likely new Minister-President – the first Green party member to hold such an office. The voter backlash against nuclear power in Germany means that there is a significant risk that the temporary closure of reactors will become permanent. This would lead to significantly higher power prices in Germany and surrounding areas for many years and probably also marks a major turning point in public support for nuclear power in Europe and to a lesser extent the US. One thing is clear, very few approvals to build nuclear plants will be given for many years across the Western world and older plants face the threat of closure or at the very least increases in safety and decommissioning costs. With CO2 emitting coal fired plants also unpopular with voters, gas fired plants will comprise the bulk of new (and replacement) capacity built, as renewables will only be able to meet a small portion of this demand in the next decade or so. Higher gas and CO2 prices, as well as excess profits for gas fired and coal fired generators seem almost inevitable and as a consequence we have significantly increased our exposure to companies with gas fired, coal fired and hydro electric generating capacity.



WIOF Global Listed Utilities Fund – December 2010 Performance Summary (total return before fees) Performance 1 1 Month 3 Months 12 Months Inception 2 WIOF Global Listed Utilities Fund 2.9% 2.8% 3.2% 15.1% Benchmark (UBS Developed Infrastructure & Utilities Index 3) 3.6% 3.5% 3.8% 14.8%

Sector Allocation

Semi Regulated Utility57%Regulated Utility

20%

Ports5%

Generation4%

Toll Roads4%

Airports2%Rail

3%


5%


US53%

Europe ex UK23%

Japan5%

Canada6%

UK13%

Overview The fund’s share price increased by 2.8% over the quarter, compared to a 3.5% increase in our benchmark index. Stock selection was the primary reason for our underperformance compared to the benchmark. Equity markets in most regions experienced strong gains over the quarter. The S&P 500 rose by 10.8%, Germany’s DAX Index by 11.0%, and the Nikkei by 9.3%. The performance of utility stocks lagged the broader market as market participants sought exposure to riskier stocks. Utilities and infrastructure stocks rose by 3.4% in the US, 4.6% in Germany and only 0.2% in Japan. Investors desire to increase their exposure to riskier stocks was driven by improving economic data out of the US in particular, with retail sales improving significantly and new unemployment claims falling substantially – in December, the number of Americans filing to receive jobless claims dropped to the lowest level in over two years. In contrast, investors deserted markets in countries with sovereign risk concerns, with Spain’s IBEX 35 index falling by 4.8% and Italy’s MIB 40 Index falling by 1.1%. The fund disposed of its small position in Spanish stocks during the quarter and currently has no exposure to Spain and a very limited exposure to Italy. The best performing stocks in the fund over the quarter were Flughafen Wien (Vienna airport) +17.2%, Fortum (a merchant generator servicing Finland and Sweden) +13.9% and Severn Trent +11.6% (a UK water utility). The worst performing stocks were DTE Energy -3.6% (a US electricity utility), Sempra Energy -5.2% (a US electricity and gas utility and pipeline operator) and Osaka Gas Co -8.5% (a gas utility in Osaka). Portfolio Changes During the quarter, we established positions in Vinci (a toll road operator in France), Inmarsat (a satellite operator), Canadian Utilities (an electricity and gas utility in Canada), GDF Suez (a global transporter and distributor of natural gas) and UGI (a US electricity and gas utility). We exited positions in RWE (a German electricity utility with merchant generation operations), E.On (a pan European electricity utility with merchant generation operations), Enagas (the Spanish gas transmission system operator) and Red Electrica (the operator of the Spanish electricity transmission grid) given our concerns over sovereign risk in Spain.


Portfolio

Consolidated Edison US Transmission & Distribution 4.8%

Vopak Netherlands Ports 4.6%

Sempra Energy US Integrated 4.5%

SCANA US Integrated Regulated 4.0%

Vinci France Toll Roads 3.9%

Top 5 Holdings

Outlook Equity markets will be impacted by some strong opposing forces in 2011, with improving economic fundamentals, particularly in the US, providing positive impetus to equities, but with concerns about many governments ability to repay their large debt burdens having a negative impact. We expect that the Federal Reserve and the European Central Bank will continue to maintain interest rates at very low levels and that the ECB will continue to provide large amounts of liquidity to the banking system. Clearly, both the Fed and the ECB have decided that their role in maintaining the stability of the banking system will continue to take overwhelming precedence over their role in keeping inflation at acceptable levels. As such, we expect the highly accommodative monetary policy of both the Fed and the ECB to continue for quite some time. Furthermore, the Eurozone members are clearly taking a “whatever it takes” attitude to defending the Euro. As such, we expect more bailouts to be provided to those Eurozone states who are unable to obtain sufficient debt from international bond markets and an increase in the size of bailouts already provided. This excess liquidity must go somewhere and some of it will likely flow into equity markets. Combined with this is the fact that both institutional and retail investors have an underweight exposure to equities in historical terms and we would expect increased inflows into equity markets from both institutional and retail investors compared to 2011 levels. On balance, we expect that the combination of increased inflows from retail and institutional investors and the increased liquidity being provided by the Fed and the ECB will drive equities in the US, UK and “core” European markets such as Germany and France higher in the short term at least. In contrast, we expect those European countries with higher levels of sovereign risk, such as Spain and Italy to perform relatively poorly.



WIOF Global Listed Utilities Fund – September 2010 Performance Summary (total return before fees) Performance 1 1 Month 3 Months 12 Months Inception 2 WIOF Global Listed Utilities Fund 1.6% 7.6% 7.2% 12.0% Benchmark (UBS Developed Infrastructure & Utilities Index 3) 1.4% 7.0% 4.4% 11.0%

Sector Allocation



Ports5%

Generation4%

Toll Roads1%

Airports2%

Rail2%


3%


US53%

Europe ex UK27%

Japan4%

Canada6%

UK10%

Overview The fund’s share price increased by 7.6% over the quarter, compared to a 7.0% increase in our benchmark index. Stock selection and country allocation were the primary reasons for our outperformance compared to the benchmark. Equity markets in most regions experienced strong gains over the quarter. Utilities and infrastructure stocks performed most strongly in the US (up 11.8% for the quarter), Canada (up 10.7%) and the UK (up 9.5%). The performance of utilities and infrastructure stocks in Japan was, by contrast, horrendous – with the sector falling by 8.4%. Half of the decline in the Japanese utilities sector was due to the share price fall of a single stock, Tokyo Electric Power (a Japanese utility with merchant nuclear generation facilities serving the Tokyo market), which fell by 14.3% over the quarter after it announced it would issue shares equivalent to 17% of its issued capital. The fall in Tokyo Electric Power dragged down other Japanese utilities as well, as investors worried that other companies in the sector may also be planning big capital raisings. The fund holds only a small total position in Japanese utilities and no position in Tokyo Electric Power. Corporate governance at the company can only be described as awful. The company has a long track record of systematic concealment from Japan’s nuclear authorities of plant safety incidents at its reactors. This alone should be enough to make any investor avoid holding any shares in the company. The best performing stocks in the fund over the quarter were Enagas (the Spanish gas transmission system operator) +16.1%, Nisource (an electricity and gas utility in the US) +14.9% and Centrepoint Energy (an electricity and gas utility in the US) +14.2%. The worst performing stocks were Tokyo Gas Co (a gas utility in Tokyo), RWE (a German electricity utility with merchant generation operations) -14.8 and Central Japan Railway (operator of a high speed rail link between Tokyo and Osaka) -23.1%. Portfolio Changes During the quarter, we established positions in Atlantia (a toll road operator in Italy), Drax Group (a UK based merchant power generator), Nisource, Sempra Energy (a US electricity and gas utility and pipeline operator), Red Electrica and Terna (respectively, the operators of the Spanish and Italian electricity transmission grids). We exited positions in Constellation Energy and Edison International (US electricity utilities with merchant generation operations), Flughafen Zuerich (Zurich Airport) and WGL Holdings (a gas utility in the US).


Portfolio

Dominion Resources US Semi Regulated Utility 6.5%

Southern Co. US Semi Regulated Utility 5.1%

Consolidated Edison US Regulated Utility 5.0%


Vopak NV Netherlands Ports 4.8%

Top 5 Holdings

Outlook Financial markets are preoccupied at the moment with the next round of quantitative easing expected from the Federal Reserve. The recent weakness in the US dollar reflects, in part, investors concerns that the Fed is willing to monetise the federal government’s debt and cause an inflation problem to solve a fiscal problem. Many economists point to the fact that inflation is low to justify the money printing of the Fed. That all depends on how you measure inflation. On a narrow definition (the CPI) it is, but if one includes increases in asset prices in the definition, inflation is increasing. The excess liquidity has to flow somewhere, and at the moment that somewhere is asset markets, be they bonds, equities or gold. At the present, the equity market has momentum behind it and we would not be surprised for this to continue for the short term at least. In an environment where investors expect further money printing and inflation, this makes sense – equities are a real asset, and prices of real assets tend to perform well (at least in nominal terms and most definitely relative to monetary assets) when central banks print money. What doesn’t make sense to us is the high prices being paid for government bonds. Investors’ headlong rush into bonds makes little sense to us, particularly given yields are at historic lows. A yield of less than 2.5% on 10 year government bonds in the US and Germany and less than 3% in France and the UK is counterintuitive to us in an environment where markets are worried about the potential inflationary impact of the Fed printing money. In absolute terms, equities are currently trading at reasonably close to fair value, but relative to bonds we feel they are good value. We expect this gap to close over the medium term.

1 Performance is calculated on I class shares, post management fees of between 1.50% and 2.25% per annum 2 Performance inception date is 31 July 2009 3 The UBS Developed Infrastructure & Utilities Index is a USD hedged, total return index


WIOF Global Listed Utilities Fund – June 2010

Performance Summary (total return before fees) Performance 1 1 Month 3 Months 6 Months Inception 2 WIOF Global Listed Utilities Fund (1.1%) (5.4%) (6.7%) 4.0% Benchmark (UBS Developed Infrastructure & Utilities Index 3) (0.8%) (6.5%) (6.3%) 3.7%

Sector Allocation



Rail2%

Generation3%


4%

Ports4%Airports

4%


US54%

Europe ex UK28%

UK6%

Canada6%

Japan6%

Overview The fund’s share price decreased by 5.4% over the quarter, compared to a 6.5% decrease in our benchmark index. Stock selection and asset allocation (we maintained an average cash balance of around 16% during the quarter) were the primary reason for our outperformance compared to the benchmark. European utilities and infrastructure stocks declined sharply over the quarter, falling by 14.4%. In contrast, US stocks in the index fell by only 3.7% and Japanese stocks by only 3.2%. The large integrated European utilities with significant merchant generation capacity were hardest hit as investors continued to worry about the impact an economic slowdown in the Eurozone would have on their earnings. Iberdrola fell by 23.1%, GDF Suex by 15.5%, E.On by 13.9%, RWE by 13.5% and Enel by 12.1%. Together, these stocks account for almost half of the total capitalization of European stocks in the index and around 14% of its total capitalization, but only account for 7% of the fund’s holdings. The best performing stocks in the fund over the quarter were Flughafen Wien (Vienna Airport) +23.1%, Northumbrian Water (a water utility in the UK) +7.6% and Vopak (a global operator of liquid storage facilities at major ports) +5.6%. Combined with our underweight position in the large integrated European utilities, they contributed the bulk of the outperformance attributable to stock selection. The worst performing stocks were E.On (a pan European electricity and gas utility with merchant generation operations) -13.9%, RWE (a German electricity utility with merchant generation operations) -13.5% and Southern Union (a gas utility with pipelines and gas storage facilities in the US) -13.3%. Portfolio Changes The correction in equity markets over the last quarter presented us with the opportunity to establish positions at attractive prices in a number of utilities in Japan – a market in which we have struggled to find value in the past. Whilst we are mindful of Japan’s sovereign debt levels, the fact that it finances around 95% of that debt domestically and consistently runs large current account surpluses means that Japan has ample foreign currency reserves to service the small stock of sovereign debt that is held offshore and consequently faces very little pressure from international bond markets. As such, we feel comfortable with the small position we have taken in Japanese equities.


Portfolio


Southern Co. US Semi Regulated Utility 4.5%

Consolidated Edison US Regulated Utility 4.4%

RWE AG Germany Semi Regulated Utility 4.1%


Top 5 Holdings

During the quarter, we established positions in Centrica (an integrated gas utility in the UK), TransCanada (a pipeline operator in Canada), Central Japan Railway Co (the operator of a high speed rail link between Tokyo and Osaka) and in three gas utilities in Japan - Osaka Gas Co, Toho Gas Co and Tokyo Gas Co. We exited our position in GDF Suez (a global transporter and distributor of natural gas), Public Service Enterprises (a electricity and gas utility in the US), Severn Trent (a UK water utility) and American Water Works (a US water utility). Outlook We expect continental European utilities to continue underperform those in the rest of the OECD over the next few months, as investors continue to have concerns about the health of the European banking system and the impact of budget deficit reduction plans by European governments on economic growth prospects for the region. The current scale of budget deficits across Europe is not sustainable and greater levels of fiscal responsibility, whilst a positive over the longer term, will inevitably lead to more subdued levels of economic growth in the short to medium term and possibly double dip recessions in some European countries. At present, we believe that the best value in our investment universe is to be found in the more regulated businesses whose earnings are less dependent on the prevailing economic conditions and it is here that we expect it is more likely we will find interesting investment opportunities over the coming months.

1 Performance is calculated on I class shares, post management fees of between 1.50% and 2.25% per annum 2 Performance inception date is 31 July 2009 3 The UBS Developed Infrastructure & Utilities Index is a USD hedged, total return index


WIOF Global Listed Utilities Fund - March 2010

Performance Summary (total return before fees) Performance 1 1 Month 3 Months 6 Months Inception 2 WIOF Global Listed Utilities Fund 3.1% (0.8)% 6.5% 11.7% Benchmark (UBS Developed Infrastructure & Utilities Index 3) 4.1% 0.2% 4.3% 10.9%

Sector Allocation



Ports3%

Generation3%


5%

Airports1%


US55%

Europe ex UK34%

UK6%

Canada5%

Overview The unit price decreased by 0.8% over the quarter, compared to a 0.2% increase in the benchmark. Stock selection was the primary factor contributing to our underperformance compared to our benchmark. The major contributor to our underperformance during the quarter was our large holding in Sempra Energy, which, at 5.8% of the portfolio, was the funds’ largest holding as at the end of March. Sempra is the owner of electricity and gas utilities in California and pipelines and gas storage facilities across the United States. The poor share price performance over the quarter was due to negative sentiment surrounding delays in the sale of some non-core businesses. The Californian utilities businesses earn some of the highest returns on equity of any US utilities and we are comfortable holding a large position in a company which owns some excellent assets but, which we believe, has some of the most competent management of any company within our investment universe. The best performing stocks in the fund over the quarter were SES (the largest Direct-to-Home satellite system operator in Europe) +18.7%, Southern Union (a gas utility with pipelines and gas storage facilities in the southern United States) +12.4% and Atco (a diversified utility with operations primarily in Canada) +10.9%. The worst performing stocks were Enea (an electricity utility in Poland) – 12.5%, Public Service Enterprises (an integrated producer and distributor of electricity in the mid Atlantic region of the US) -10.2% and Sempra -10.2%. Portfolio Changes During the quarter, we established positions in Atco, DTE Energy (an electricity and gas utility located in the north eastern United States), Southern Union and Vopak (a global operator of liquid storage facilities at major shipping ports). We exited positions in Electricidade de Portugal, Red Electrica De Espana and Terna, mainly in order to reduce our exposure to Portugal, Spain and Italy, where sovereign risk issues are coming to the fore. Our portfolio re-weightings were driven not only by our desire to take advantage of opportunities to buy attractive companies at significant discounts to value (namely Vopak and Atco), but also a desire to reduce our exposure to countries with greater sovereign risk issues (Portugal, Spain and Italy) and re-invest that capital in countries with higher growth prospects and stronger government finances (Canada and the Netherlands).


Portfolio


E.On AG Germany Semi Regulated Utility 5.3%


Atco Ltd Canada Semi Regulated Utility 4.0%


Top 5 Holdings

Outlook Whilst the world economy is clearly in better shape than it was 12 months ago, the events in Greece should be acting as a warning signal to investors about the risks facing some of the peripheral Eurozone economies. Greece’s public finances are a shambles, and longer term, some kind of sovereign default or restructuring of Greece’s sovereign liabilities seems inevitable, regardless of the actions of the IMF, European Central bank or Eurozone governments. History shows that sovereign defaults or debt restructurings tend to occur in clusters and some kind of contagion effect is highly likely – a default or debt restructuring in Greece will most likely lead to similar events in other heavily indebted Eurozone economies – with Portugal and Spain two of the more likely candidates. A nation’s size is no guarantee against sovereign debt difficulties and there could be some surprising casualties in the coming years. It is worth remembering that the United Kingdom received a support package from the IMF in 1976 with a budget deficit significantly lower as a percentage of GDP than it has at present. The rules of finance have not been rewritten, nations to not have a greater debt carrying capacity than they did in the past, even if historically low interest rates makes it appear so. The majority of OECD nations will need to undertake stringent austerity measures in the coming years if they want to avoid Greece’s fate. In such an environment, defensive stocks tend to outperform growth stocks. Our portfolio is defensively positioned by virtue of our investment universe, which exhibits earnings which are less dependent on economic conditions than equities generally. Furthermore, the fund has no exposure in Greece, Portugal or Japan and underweight positions in Spain, Italy and the UK.

1 Performance inception date is 31 July 2009 2 The UBS Developed Infrastructure & Utilities Index is a USD hedged, total return index

WIOF Global Listed Utilities Fund December 2009

Quarterly Performance Summary (total return before fees)

Performance 1 Month 3 Months Inception 1 WIOF Global Listed Utilities Fund 5.9% 7.4% 12.6% Benchmark (UBS Developed Infrastructure & Utilities Index 2) 5.6% 4.1% 10.7% The unit price increased by 7.4% over the quarter, compared to a 4.1% increase in the benchmark. Geographic allocation, stock selection and sector allocation were all important contributors to our performance over the quarter, contributing 1.4%. 1.2% and 1.1%, respectively, to our outperformance over our benchmark. Our cash weighting was a drag on our relative performance though, contributing -0.4%. The fund’s overweight position in the US (56% of our equity holdings vs an index weight of 37%) and our underweight position in Japan (where we have no holdings vs an index weight of 12%) were important contributors to our outperformance. In our view, Japanese utilities are overpriced and markets have underestimated the significant sovereign risks associated with investing in a country with a government debt to GDP ratio of around 200%. Our overweight position in the regulated electricity and gas transmission sector (24% of our equity holdings vs an index weight of 10%) also contributed to our outperformance. The sector is attractively valued and its regulated nature means that the earnings of companies in the sector are even less dependent on economic conditions than those of companies in the other sectors within our investment universe (it should be noted that our investment universe itself exhibits earnings which are less dependent on economic conditions than equities generally). In this sector, regulators set the prices a utility can charge at a level which ensures that, provided the utility keeps costs at or below agreed levels, they will recover interest costs, tax and a return on equity of (typically) between 10% and 12% p.a. The best performing stocks in the fund over the quarter were TECO Energy (an electricity and gas utility in Florida) +12.7%, National Grid (the owner of electricity and gas utilities in the UK and the US) +11.0%, Dominion Resources (the owner of electricity and gas utilities and pipelines in the north eastern United States) +10.1%. The worst performing stocks were SES (a direct-to-home satellite system operator in Europe) -2.4%, E.On (a pan European electricity and gas utility) -3.2% and Flughafen Wien (Vienna airport) -6.0%.

Market Commentary

World equity markets continued to perform strongly over the quarter, with the MSCI World Index (US dollar) up 4.2% over the period. Investors largely remained convinced that the extraordinary fiscal stimulus packages enacted by the governments of the worlds largest economies and the money printing engaged in by the central banks of those economies would pull the world out of recession and lead to a “V shaped” recovery. The positive 3rd quarter US GDP figure and the improvement in industrial production figures across the OECD, provided the justification for investors who wanted to believe in the “V shaped” recovery story and for now at least, ignore the realities of sovereign debt issues which must inevitably come to bear at some point.

Outlook

Since inception, the fund has maintained a significant overweight position in the regulated electricity and gas transmission sector. As a consequence, the fund has a defensive stance. Given the significant rallies in global equity markets over 2009, we are comfortable maintaining this stance and will most likely retain this significant overweight position in 2010. Over the coming months, we will be paying particular attention to sovereign risk in the countries we invest in. With the significant budget deficits being run by the governments of the majority of OECD countries coupled with the already high debt to GDP ratios of many of these countries, notably Japan, Italy and Greece, we believe that financial markets will be increasingly focused on sovereign risk in 2010. We are also of the view that consensus

estimates of earnings within the more cyclical sectors of the equity markets of developed countries may prove to be overly optimistic, given that almost all of the OECD economies still face significant economic headwinds, including high unemployment and high consumer debt levels, which we think will put a significant brake on consumer demand. As governments begin to rein in spending (or increase taxes), as they inevitably must given the high levels of government debt prevalent in much of the western world, we see significant risks to corporate earnings and hence stock market valuations, particularly in relation to more cyclical sectors. Following the strong rebound in global equity markets in 2009, we think a defensive stance is appropriate.

Portfolio Changes

During the quarter, we established positions in American Water Works, SES and GDF Suez and added to our positions in Sempra Energy and Southern Company. American Water provides drinking water and wastewater services to around 15 million people across the US. The fund took a position in American Water following the sell down by RWE of the remainder of its stake in the company, which removed the stock overhang on a company we have considered to be attractive from a valuation perspective for some time. We believe American Water has significant scope to grow earnings over the next few years following the removal of the “stay out” provisions RWE agreed with regulators when they acquired the company in 2003. With these “stay out” provisions removed, American Water Works has, over the last 18 months, filed rate cases with all of the Public Utility Commissions who regulate its operations. The new rate cases should allow them to increase the rates they charge to customers significantly and drive strong earnings growth over the coming years. SES is the largest Direct-to-Home (DTH) satellite system operator in Europe. The combined satellite system delivers services to more than 122 million DTH and cable households and transmits more than 2,500 analogue and digital television and radio channels. We believe the company has significant opportunities for growth as a result of the growth of High Definition television and the continued migration of households from analogue to digital television, a process that will take many years. The strong barriers to entry enjoyed by incumbent satellite system providers, combined with this growth opportunity should lead to strong earnings growth for SES for some years. GDF Suez is an integrated producer and distributor of natural gas and electricity with interests in power generation worldwide. By virtue of its gas production, transportation and storage capacity, GDF is able to mitigate to some extent the volatility of margins within the power generation business and take advantage of price differentials between different LNG markets. At a dividend yield of over 6%, we believe GDF is attractively priced at present. During the quarter, the fund sold its holding in Flughafen Zurich and slightly reduced its position in Northumbrian Water, although we retain a significant overweight position in Northumbrian Water. The fund disposed of its position in Flughafen Zurich as a result of risks associated with the share register. The stock is relatively illiquid and during the quarter, Nucleus became concerned about the stability of FUM of the largest institutional holder on the register who owns some 15% of the company.

Top 10 Holdings


Portfolio



Enagas SpA Spain Regulated Electricty & Gas Transmission 4.0%

RWE AG Germany Semi Regulated Utility 3.9%

National Grid PLC UK Regulated Electricty & Gas Transmission 3.9%


Progress Energy, Inc US Regulated Utility 3.4%

Consolidated Edison US Regulated Electricty & Gas Transmission 3.4%

FPL Group US Semi Regulated Utility 3.4%

Southern Co US Regulated Utility 3.2%

Sector Weightings

0%

10%

20%

30%

40%

50%

Semi RegulatedUtility

Regulated Utility RegulatedElectricity & Gas

Transmission

Generation Toll Roads CommunicationsInfrastructure

Rail Water Airports Other

WIOF Global Listed Utilities Fund

Benchmark (UBS Infrastructure & Utilities Index)

Country Weightings

0%

10%

20%

30%

40%

50%

60%

US Europe ex UK Japan UK Asia excl. Japan Canada

WIOF Global Listed Utilities Fund

Benchmark (UBS Infrastructure & Utilities Index)

IMPORTANT NOTES This report has been prepared for information only, and it does not represent an offer to purchase or subscribe for shares. While Nucleus Global Investors Pty Ltd (“Nucleus”) believes that the information is correct at the date of production, no warranty or representation is given to this effect and no liability can be assumed for the correctness or accuracy of the given information, which may be subject to change at any time, without notice. Returns can be volatile, reflecting increases and decreases in the value of underlying investments. Changes in market conditions and exchange rates can cause a decrease or an increase in the share value. Past performance does not guarantee the same results in the future. Nucleus Global Investors Pty Ltd (“Nucleus”) is the manager of the WIOF Global Listed Utilities Fund (the “Fund”), a sub fund of World Investment Opportunities Funds (the “SICAV”), an open-ended investment company registered on the official list of collective investment undertakings pursuant to part I of the Luxembourg law of 20th December 2002 on collective investment undertakings (the “2002 Law”). Swiss & Global Asset Management (Luxembourg) S.A is the designated management company of the SICAV, authorised under the provisions of Chapter 13 of the 2002 Law. Applications can only be made using the forms below pursuant to the current WIOF Prospectus dated July 2009. Prospectuses can be obtained by contacting Dan Burke at Nucleus on +44 777 619 4502, or by emailing [email protected]. The SICAV has not been and will not be registered under the United States Investment Company Act of 1940, as amended (the “1940 Act”), nor under any other U.S. federal laws. Accordingly, no shares in the Fund are being offered to U.S. persons (as defined under United States federal securities laws) or persons who are in the United States at the time the shares are offered or sold. Before investing in the Fund, investors should contact their financial adviser and refer to all relevant documents relating to the Fund, such as the latest annual report and prospectus, which specify the particular risks associated with the Fund, together with any specific restrictions applying, and the basis of dealing. In the event an investor chooses not to seek advice from a financial adviser, he should consider whether the Fund is a suitable investment for him.

Economy & Finance

Quarterly reports - WIOF Global Listed Utilities Fund