Monthly

Performance Update

Emerging Leaders Investment Limited

July 2013 '...the future for earnings will help shape the market response.'

Market Review

Portfolio performance for the month of July 2013 was 6.04% versus the benchmark return of 4.99%.
The Australian mid/small cap equity market, as measured by the Emerg- ing Leaders composite benchmark1, closed the month 5.0% higher. A small shift in the US Fed's rhetoric regarding the asset repurchase pro- gram and the backing of both the ECB and the People's Bank of China on their corresponding monetary policies provided support for positive investor sentiment. The Reserve Bank of Australia clearly indicated the potential for a further rate cut to help bolster the domestic economy (RBA cut rates to 2.5% on 6th August).

Fund Review

At a sectoral level, the Portfolio benefited from the overweight position in Financials (ex AREITs) and the underweight positions in Consumer Sta- ples and Healthcare. The nil holdings in AREITs also added relative value. Major detractors to the Portfolio included the nil holdings in Information Technology and overweight positions in the Industrials and Telecom- munication sectors.
At a stock level, the overweight positions in Bionomics, REA Group and Seven West Media were the largest positive contributors to perform- ance. The nil holdings in Treasury Wine Estates, ALS and Echo Enter- tainment Group also added value. Detractors to the Portfolio included the overweight positions in McMillan Shakespeare, Ainsworth Game Technology and Fairfax. The nil holdings in Arrium also detracted from relative performance.

Outlook

The local market is now firmly focused on bottom up outcomes, with the commencement of the August reporting season. Whilst it will be inter- esting to see where FY2013 actually ended up, the future for earnings will help shape the market response. Current FY14 EPS growth estimates for mid cap and small cap market components are 18.7% and 25.2% respectively, leaving valuations for those sub-indices sitting at 14.5 and
14.3 times earnings. The FY15 prospective valuations are at 12.7 (mid) and 11.8 (small) times, on the assumption of 14.0% and 21.9% earn- ings growth on FY14 numbers. These valuations are not stretched but do require an element of belief that earnings are unlikely to be downgraded materially from here. Having been systematically lowered over the last several years domestic corporates are finally seeing headwinds turn to tailwinds at a time when significant cost cutting measures have been put
in place to protect falling margins.

Portfolio Characteristics

Returns as at 31st July 2013

Portfolio%^

Index* Value Add%

One Month 6.04

Three Months -3.33

One Year p.a 25.15

Three Year p.a 7.29

Five Years p.a 5.16

Since Inception p.a

Date: March 2005 8.10

4.99 1.04

-3.68 0.35

13.32 11.83

2.71 4.58

-0.74 5.90

3.37 4.73

Top 10 Stocks

*70% S&P/ASX Midcap 50 Acc Index and 30% S&P/ASX Small Ord Acc Index

^ Gross of Fees

Ausbil Dexia Limited, Level 23, 207 Kent Street, Sydney NSW 2000 T: 02 9259 0200 F: 02 9259 0222 W:www.ausbil.com.au

Net returns are after fees, before taxes and assume reinvestment of all distributions. You should note that past performance is not necessarily a guide to future performance. Ausbil Dexia Limited (ACN 076 316 473, AFSL 229722) does not give any warranty as to the accuracy, reliability or completeness of the information contained on this page. Offers for investment in Ausbil Dexia funds are made via the relevant current Product Disclosure Statement, which can be obtained by contacting our office.

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