EFTA01135321.pdf

BERN DYNAMIC LLP The Bern Lucerne Fund Bern Dynamic LLP I 41 Paradise Walk I London, SW3 4JL UK I Phone •44 20 7745 2435 EFTA01135321 Disclaimer THESE MATERIALS DO NOT CONSTITUTE AN OFFER OF SECURITIES. SUCH AN OFFER WILL ONLY BE MADE BY MEANS OF A CONFIDENTIAL MEMORANDUM TO BE FURNISHED TO QUALIFIED INVESTORS UPON REQUEST. ALL INFORMATION CONTAINED HEREIN IS SUBJECT TO REVISION AND COMPLETION. THESE MATERIALS ARE CONFIDENTIAL AND INTENDED SOLELY FOR THE INFORMATION OF THE PERSON TO WHOM DELIVERED. RECIPIENTS MAY NOT REPRODUCE OF TRANSMIT, IN WHOLE OR IN PART, TO THIRD PARTIES. NOTE: Performance results are described herein are net of fees. The latest month's performance is preliminary and subject to revision. BERN DYNAMIC LLP 2 EFTA01135322 Bern Lucerne Fund Introduction Bern Lucerne Fund The fund is a joint venture between Bern Dynamic LLP and Lucerne Capital, LLC The Bern Lucerne Fund is a joint venture between Bern Dynamic (GP) and Lucerne Capital (Sub-Advisor), a collaboration born from a childhood friendship between Thijs Hovers (Lucerne) and Lars Christiaanse (Bern). Lucerne Capital is a European long-short equity fund with a track record starting in 2002 and a net annual return of over 13% since inception. The Bern Lucerne Fund will run pad passu with the existing Lucerne Capital Fund Strategy. As General Partner, Bern will monitor and control the fund's investments and offer transparency to investors, while maintaining client relationships and facilitating dialogue between investors and Lucerne. All historical data presented in this document represent Lucerne's existing offshore fund. 3 BERN DYNAMIC LLP EFTA01135323 Bern Dynamic Overview Bern Dynamic LLP ("Bern") A boutique advisory and brokerage firm since 2011 Partner: Lars A. Christiaanse Bern offers clients access to a pool of world-class, senior experts with a global reach, along with the experience and ability to provide advice across the broadest range of issues; geopolitical, security and business. In tandem with its advisory role, Bern Dynamic will use its unique international network to benefit its clients; creating, managing and executing the ambitions of investors and entrepreneurs. Team of 16 in London, UK 4 BERN DYNAMIC LLP EFTA01135324 Lucerne Capital Management, LLC ("Lucerne") An SEC-Registered Investment Advisor since 2000 Partners: Pieter Taselaar (founder) and Thijs Hovers European long / short equity management e Firm assets under management: $230 million (04.30.2013) 10-year track record compounding 13.6% net of fees annually, +259.4% cumulative net since inception (May 2003 through April 2013) ➢ Team of 6 in Greenwich, CT Unique management skill attributable to Unique expertise in uncovering value in global leaders and local leading-edge companies within Continental Europe Four decades experience interacting with a focused list of 250 European management teams Evaluate companies in a proven and repeatable private equity investment style, considering dynamics for above-average market growth, free cash flow, hard assets, and valuation Tactical trading around positions with defined entry and exits BERN DYNAMIC LLP EFTA01135325 Lucerne Cumulative Returns vs Indices 350% 325% 300% 275% 250% C 5... 225% 3 4-• 200% N ce 175% Q) 150% tit I "— CO z E is." = 50% (..) 44 25% _C1) 0% G .25 .50% .75% 2002 2003 2004 2005 2008 2007 2008 2000 2010 2011 2012 2013 —The Lucerne Capital Offshore Fund, LTD Cumulative Returns —MSCI Euro Net LCL TR Cumulative Returns —S&P S00 TR Cumulative Returns Net Net Cumulative Annualized Net Annual Returns 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Return Return The Lucerne Capital Offshore Fund, LTD 29.7% 18.7% 27.6% 25.9% -3.5% -43.8% 95.9% 24.7% -19.8% 26.5% 8.1% 259.4% 13.61 MSCI Europe Net LCL TR 19.8% 12.2% 24.9% 19.1% 6.0% -38.9% 27.7% 6.8% -9.3% 15.6% 9.0% 101.9% 7.3% S&P 500 TR 22.8% 10.9% 4.9% 15.8% 5.5% -37.0% 26.5% 15.1% 2.1% 16.0% 12.7% 113.6% 7.9% BERN DYNAMIC LIP 6 EFTA01135326 The Bern Lucerne Fund Strategy - European Long / Short Equity Opportunity Capitalize on the inefficiencies in the Continental Europe that result from: • o Reporting lags o Inadequate analyst coverage Invest in a fund with well-established operational and administrative o Misunderstood trade and fiscal policies controls both internally and through service provider partners o Changing industry 'ie. Maintain a highly liquid portfolio allowing for flexible risk management dynamics among and active management companies in the same value chain Focus on making money on the buy by being more nimble than other o Changing industry and European equity investors, of which there are few true competitors corporate dynamics o Perceived-versus-real Portfolio Construction changes to the Universe of Continental European large, mid- and small-cap companies competitive landscape Currency exposure is monitored and hedged to the USD o Lack of deep equity \ it culture Opportunistic management of exposures 20 to 50 positions with sector and country diversification Normal holding period: 3 to 24 months for longs, 1 to 6 months for shorts Long positions are usually less than 10% of NAV and short positions less than 3% At least 70% of the portfolio can normally be liquidated over S to 7 days, measured as no more than 25% of average daily traded volume BERN DYNAMIC LLP 7 EFTA01135327 Investment Process Bottom-up value research Research requires watching for a private equity style opportunity Macroeconomic Overlay with a potential 30% return scenario Alignment of portfolio to macroeconomic Universe of 2000 European stocks environment Rotation between sectors Quality filter using metrics that have proven to be good indicators of companies' financial and companies with performance varying sensitivities to discretionary versus non- discretionary spending Dynamic use of the screening tool to focus our bottom-up research efforts Established database of research on economic Apply in-depth bottom-up valuation-driven research to selected group of 100-200 stocks cycle sensitivity: durable/ non-durable segments, Longs Typically Exhibit +Growing cash flows due to a strong Shorts Typically Exhibit -Declining industrial/consumer competitive position +Opportunities to expand domestic and return on capital employed -Balance buyers, competitive global market share +High-quality management focused on sheet or cash flow issues -Low landscape opportunities to expand market share while delivering a barriers to entry -Margin pressure - continuously high rate of return +Corporate events that are High multiples on incorrect earnings catalysts to change estimates BERN DYNAMIC LLP 8 EFTA01135328 Proprietary Opportunity Screen Index CRC IV liketert._Peno mower BESTFPERIOO soar once tan ono, a% INT Dee mating +Her NnM weicep One stage ESITDA Gross Margin vs ROTC ex tin Debt/ EV/ESIT vs Valuation Ticker Name Sector Revenue %HMCO CAGR 4 YR 5 Tr data ROIL Gooda di ICY % DIV % LOMA Capital intern, History upside title tp ARKEMA Chemicals 8% .3% 14.1% 14.6% 3.0% 2.6% 0.6 AC FP ACCOlt SA Travel & leisure 20% 52% 30% 2.7% 03 AI FP AIR UQUIDE SA Chemicals 21% 2% 10.4% 14.0% 4.2% 10% 14 41% PIO FP ALSTOM Industrial Engineering 15% .5% 25% 13.3% 6.7% 2.8% 13 BN FP CANON( Feed Producers 11% 11% 9.9% 50% 11% Lfi 25% CA FP CARREFOUR SA Feed & Drug R013110(5 42/6 Om 52% 10% 13 CAP FP CAP &MN! Software &Computer Services 21% 9.3% 14.5% 31% 2 DGFP VINO SA Constmcnon & Matenals 0% • 1% 6.0% 24 (PIMP (ADS NV Aerospace & Defense 13.7% fiA 2 EDF FP EDF Elettnety 4.916 14 2% 27 4 El FP ESSILOR INTERNATIONAL Health Care EQUIPTCM & Servic 13.7% 4R% 3.5% a2 24% EN FP BOUTGUES SA Construction & Matenais 5.4% 86% 398 1It 3 FP FP TOW SA Oil & Gas Producers 88% SS% 4.1% Sze 115 3 42% FR FP FRANCE TELECOMSA Fixed line Telecommunications 79% 149% 2-3 4914 GU FP GOF SUEZ Gas, Water& Multiutilities S' .5% 12% 23 GTO FP GEMALTO Electronic & Electrical (Quinn a 54a 11.9% 4.7% Go, 3 4% LG FP WANG( SA ConstiuctIon & %%tonal, 15% 27 Zi% 2 .1234 LR FP LEGRAND SA Electronic & Electrical (Quinn 25% 0% 10.0 6.6% 11% OS 2 MC FP LUPIN MOST HENNESSY LOUIS VUI Personal Goods 10% OM 11.5% 110/6 5.2% 2.5% 03 22% M.FP MICHELIN (CGDEI Automobiles & Parts IS% UM 14.4% 88% 5.3% 19% OA 3 12% MT NA ARCELORMTTAL Industrial Metals& Wining IS% 39% 1.4G 12 46% all IMI OR FP L'OREAL Personal Goods 10% 42% 2.2% 2 22% Pp FP PPR General Retailers I 10% 6.2% 2.9% aS 2 44% PUBFP PUBUOS GROUPE Media 25% 7,0% 1.9% 4 24% RI FP PERNOPRICARD SA Beverages 4% 4.8% 1.8% RHO FP RENAULT SA Automobiles & Palls 2,4 1% .5% 4.7% 43% SAF FP SAFRAN SA Aerospace & Defense 25% 4% 10.3% 14.7% 5.3% 1976 04 3 3% SAN FP SANOFI Pharmaceuticals& Illotechnolog IS% 2% 1% SP% 4.3% 04 SGO FP COMPAGNIE DE SAINTGOBAIN Construction & %%tonal' 28% .211 8% 48% 7.5 6.2% 4.4% 1.7 41% .794 SUFP SCHNEICER ELECTRIC SA Electronic & Electrical Equipm IS% 5% 10. 69% 3.5% 02 20% 3 11% TIC FP TECHNIP SA Oil Equipment. Services& Dist 10% 21% 11.0% 4.9 13% 35% 62% VIE FP VEOLIA ENVNIONNEMENT Gas, Water& Multiutilities 4% 11% 59% .4% WV FP VIVENDI Media .1% 7.3 50% 1.7 a 2414 VK FP VALLOUREC Industrial Engineering 155 1% 5.2% .0396 14% 1.9 2 9 BERN DYNAMIC LIP EFTA01135329  Multiple Contraction, Cheap Global Players Richemont LVMH 2500 27 12000 30 10000 - 25 2000 22 8000 20 1500 17 6000 15 1000 12 4000 - 10 500 2000 -5 0 0 0 FY1 FY1 FY1 FY1 FY1 FY1 FY1 2014F Apr-05 Apr-06 Apr.07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 1993 1996 1999 2002 2005 2008 2011 - EBITDA - EWEBrADA (RHS) —•EBITDA ta*EWEBITDA Index Ticker Company EBITDA Gross Margin ROIL ROIL Working Capital FLY% FLY NV % Balance sheet Shares Outstanding EV/EBITDA Valuation upside .. LAG vs 4 r avg ex Goodwill 4 trend 4Yr Avg ND/EBITDA 6YR LAGR vs Hist (%) SIM CFR VX CIE FINANCI•BR A 2% -65% 4 2% -15% LAC IOC FR LVMI 16% 0% -14% 10 BERN DYNAMIC LLP EFTA01135330 Europe: Pockets of Excellence 2 ..‘" :saint ‘tEr ir tilL 4r Pockets of Excellence • Aged Spirits 4- Automotive • Luxury Goods Focus Countries 4- Oil Services Germany Northern Italy Engineering & Industrial Services France Ar Scandinavia • Engineering & Telecom Cabling Switzerland Austria Benelux Despite the maturity of the European capital markets, value dislocations and inefficiencies persist BERN DYNAMIC LIS 11 EFTA01135331 Europe: Global Footprint Example Worldwide automotive industry —global unit sales Exposure to growth markets is key Allows for acceleration in growth despite challenging domestic markets 70 6% CAGR 2% CAGR 60 - SO 40 • 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 ■ Developed markets ■ Emerging markets BERN DYNAMIC LIP 12 EFTA01135332 Yield is Scarce German 2 yr Government Yield French 2 yr Government Yield .0000 5.0000 ■Bid Yield To Maturity 0.0132 IIIBid Yield To Hoosity 0.1112 T High on 06/19/08 4.6998 T /kb on 06/19/08 42362 +Avenge 1.2701 4.0000 .Menge 13114 1 low cn 07/31/12 -0.0913 1 ld m 12/07/12 0.0303 4.0000 . — %AVG (203) 0.0395 ■SMA% (200) 0.1716 'I SMAYG (40) 0.0318 OW% (40) 0.1562 III SMAYG (20) 0.0115 3.0000 •SMAV% (20) 0.1353 3.0003 2.0000 10000 L0000 1.0000 Negative yield 2008 2009 2010 2011 2012 2013 2018 2009 2010 2011 2012 2013 53541326 Cam BM 0 IN 03/13/15) Dais 01.33A2C06-23ANIZ)13 Copircitg 2013 Docaterg Sate LP. 234,-2013 03:15:24 0112058 Cap (81/6 21/2 01/15/15) Cownsitg 2013 Morten? Finance L.P. 234a-2013 09:16:48 13 BERN DYNAMIC LLP EFTA01135333 Corporate Bond Yields to All-Time Low European 888 Corporate Yield EURO 600 Stock with Div Yield > Credit 620 crOLast Price 2.766 T 80 on 10/14/08 6.460 +Average 4.4% 6.000 i Low 04/22/13 2.766 an ■SINVG (2%) 3.177 5.500 ISMA% (40) 2.918 111944% (20) 2.850 5.000 4300 4.1):)0 3.500 2 .766% an all time low 1999 20002001 2002 20032004 2005 20062007 2008 20092010 20112012 —3i companies DY > CY —Average ....while dividend yields over credit is at an all time high 14 BERN DYNAMIC LIP EFTA01135334 Leading German engineer with globalfoot print and secular growth trends • World market leader in paint shops for automotive industry • Unique footprint after decades of expanding in growth markets Summary Financials ➢ Unique skillset helps lower cost and energy efficiency at OEMS Sales 2012 1.5bn EBIT 2012 170m • Volkswagen, Daimler and BMW among largest clients EBIT CAGR 2012-2015 20% • German OEM Capex plans reveal > 10% growth per annum Market cap 1bn • High investments in more energy efficient plants Net debt/ EBITDA 0.1x • As well as expansion in Emerging markets EV/EBIT 2013 5.3x Dividend Yield 2013 3.80% • Valuation suggest Duerr at peak profitability, while we expect ROIC 16% many years of +10% growth Unique Global Footprint Country Founded Employees China Expansion Brazil 48 years 250 2005 2011 CAGR% Mexico 46 years 210 Orders 146 858 34 South Africa 41years 50 Sales 83 575 38 Korea 30 years 115 Employees 119 887 40 China 28 years 1550 Source: Duerr India 21years 410 Russia 14 years 30 Source: Duerr BERN DYNAMIC LLP 15 EFTA01135335 Example: Remy Cointreau a lla Most Premium Aged Spirits Company in Europe with Global Reach • Sales dominated by cognacs, Remy Martin is main brand ). Strong presence in China and other growth markets • Growth is supply constraint, so pricing power is high • Huge entry barriers due to 'aging' and strong brands • 3.5% dividend yield, 30% EPS CAGR, EV/ EBIT 13x Mar-14 • Strategic value confirmed by industry transactions above 20x EBIT Examples: Diageo — United Spirits & Pernod - VNS Sales Breakdown The Art of Compounding 400 Americas ,32.10% 300 ropepackail 200 Europe/ Middle 100 NI 1 East/ 0 Africa, 2009 2010 2011 2012 2013 2014 24.30% Ebit 16 BERN DYNAMIC LIS EFTA01135336 Shorts: Fake Yielders Utilities & telecom incumbents, among others, risk dividend cuts and right issues Example: Dutch telecom operator KPN, declining top line in all segments • Fixed line and mobile hit hard • Capex requirements still high, due to aging copper network ). Optical fiber peer Ziggo gaining market share rapidly in profitable triple-play segment • Dividend cut; rights issue is next 12 9% 11 8% 10 7% 9 6% 8 5% 7 6 5 4 3 2 2008 2009 2010 2011 2012 2013 -KPN Share price Implied Dividend yield BERN DYNAMIC LLP 17 EFTA01135337  urope is Investable Again The Draghi Effect Italian and Spanish 10 yr Yields 'MOW Vied To Katurity 3.9225 /.0300 T nigh on 01/00/12 / too on 04/23/13 7.1586 5.2362 3.9531 "•6.5000 Credit market takes view European SmAvG (200) III SHAW. (40) SMAVG (20) 4.9096 4.5336 4.39(6 .6.0000 system is well underwritten .5.500D Growth periphery remains subdued However, our companies are positioned to benefit from global growth Soo Doc HY 2012 rJ.,..1noo Cont. mro:z 1/2 13 /01/2) Daft OL14.0012-2541.13.1023 2013 Copynahn 2013 conanton onnomi.P. 33./...•201 Austerity and tax hikes widen gap NOW Yield To Notwity 4.2503 . 7.5000 between winners and losers T High co 07/24/12 7.6206 Among' 5.6712 11.9r on 04/23/13 4.2503 . 7.0300 • SMOG (200) 5.6172 • SMAVG (40) 0567 .6.5000 1.51.1.AVG (20) 4.75017 . 6.0000 P.251570 Cap (501301 5.4 01/31/1 18 BEAN DYNAMIC LLP EFTA01135338 Appendix Appendix ➢ Monthly Returns ➢ Terms and Service Providers ➢ Bios ➢ Valuation Metrics ➢ Back Office Processes ➢ Top 5 Holdings ➢ AUM History ➢ Investor Base ➢ Awards & Press ➢ Investor Relations 19 BERN DYNAMIC LLP EFTA01135339 Net Monthly Returns MSCI Net The Lucerne Capital Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year Europe Offshore Fund, LTD LCL TR 2013 4.8% 3.5% -0.6% 0.2% 3.6% 12.1% 11.7% 2012 12.5% 7.0% -0.7% -0.4% -6.1% -2.1% 0.9% 2.1% 3.1% 2.9% 3.5% 2.2% 26.5% 15.6% 2011 -2.4% 1.4% 4.2% 1.3% -3.4% -0.7% -9.2% -11.4% -5.6% 8.9% -3.7% 0.5% -19.8% -9.3% 2010 -1.2% -6.4% 11.8% -0.1% -12.4% -2.6% 4.2% -5.3% 11.3% 10.1% 6.5% 9.9% 24.7% 6.8% 2009 -0.8% -8.6% 1.9% 28.8% 16.4% 1.1% 13.7% 15.5% 10.2% -9.2% -1.0% 7.5% 95.9% 27.7% 2008 -16.0% 3.8% -3.8% 6.3% 1.7% -11.2% -0.2% 133% -17.2% -15.0% -2.6% -10.1% -43.8% -38.9% 2007 3.0% -1.2% 5.6% 5.8% 3.7% -0.4% -2.5% -6.7% -0.2% 3.2% -10.4% -2.1% -3.5% 6.0% 2006 7.5% 3.7% 2.9% 2.0% -5.1% -0.9% 0.3% 2.1% 0.2% 2.7% 1.9% 6.5% 25.9% 19.1% 2005 1.8% 4.5% 0.8% -2.0% 2.5% 3.8% 4.5% 2.1% 4.7% -4.6% 3.6% 3.5% 27.6% 24.9% 2004 6.1% 3.0% -3A% -0.3% -1.4% 1.5% -0.3% 0.1% 2.4% 1.0% 4.5% 4.5% 18.7% 12.2% 2003 4.2% 3.9% 5.4% 2.5% 1.0% 6.0% 2.1% 1.6% 29.7% 19.8% Cumulative since inception 272.5% 107.0% Inception: May 2003 Net annualized 13.9% 7.5% 20 BERN DYNAMIC LIP EFTA01135340 Terms and Service Providers The Bern Lucerne Fund Fees Management fee: 1.5% Incentive fee: 20% Liquidity Monthly, with 60 days notice Minimum Investment $500,000 Early Redemption Fee First year, 2% Administrator Citco Fund Services (Bermuda) Ltd Prime Brokers Morgan Stanley Goldman Sachs Auditor PricewaterhouseCoopers Legal Paul, Weiss, Rifkind, Wharton & Garrison Walkers 21 BERN DYNAMIC LIP EFTA01135341 Bios Lucernce Capital Team KAI WU, Chief Compliance Officer/Chief Financial Officer since 2007 PIETER TASELAAR Founding Partner & Portfolio Manager since 2002 > Previously, Associate, PricewaterhouseCoopers > BS, Georgetown University ✓ Previously, Senior Managing Director, ABN AMRO New York, Head of European Equities CASEY NUNEZ, Controller/investor Relations since 2010 ✓ Corporate Finance and Capital Markets, ABN AMRO Amsterdam ✓ MBA, Columbia University Previously, Senior Associate, BDO Seidman 'r Law Degree, Leiden University, the Netherlands • BS, Georgetown University THUS HOVERS Partner & Portfolio Manager since 2007 k i l lAN JOHNSON, Head of Trading since 2007 ➢ Previously, Senior Account Officer, Citi Private Bank r BS, University of Florida • Previously, Head of Pan European Small and Mid-cap Equity Research, ABN AMRO 'Ar Head of Benelux Equity Research, ABN AMRO YOHANES WAHYUDI. Trader since 2011 'Ar Senior Equity Analyst, ABN AMRO • Equity Analyst, Rabobank Previously, Trading Assistant and Research Analyst Intern, Matrix • MA, International Finance Capital Group • BA, Economics, University of Amsterdam, the Netherlands r BS, Syracuse University • II Ranked Analyst #2, 2006 • Thomson Extel - #1 Benelux: Small Caps Research, 2006 • Brendan Woods Top Gun, 2010 and 2011 • Brendan Woods Best Minds in Consumer Products, 2011 BERN DYNAMIC LLP 22 EFTA01135342 Absolute fair value metrics (rather than relative value analysis) enhances the selling discipline Strict valuation multiples at entry to invest in pricing inefficiencies with limited downside ✓ Identify attractive entry points with a potential 30% return scenario r Typically 10x EV/EBIT for strong global franchises, generating high returns and have a low capital intensity to support growth r Typically 6x EBIT for more capital intensive cyclical stocks Key variables are cash conversion, capex/EBITDA, ROIC, fair equity risk premium, cost of debt Assess risk (beta) by the volatility of a company's cash flow and earnings growth Cash flow based valuation model Focuses on key drivers to generate cash under a variety of market circumstances: • Top line and gross margin resilience • Cost, working capital and capex flexibility • Potential risks in tax, interest charges and hedging policies Ongoing testi