Australian Diversified Jul 2017 Income Fund Factsheet Fund Objective

The Lazard Australian Diversified Income Fund seeks to achieve: . an annual income return above the Reserve of Cash Rate (“Cash Rate”); . a total return that exceeds the Cash Rate over the longer term; and . lower volatility in total returns than the S&P/ASX 200 Accumulation Index.

Performance Lazard Australian Diversified Income Since 1 Month 3 Months 1 Year 3 Years 5 Years Inception Fund (%) (%) (%) (% p.a.) (% p.a.) (% p.a.) Income Return 0.1 0.5 4.5 4.6 4.8 4.8 Franking Return 0.0 0.1 1.4 1.4 1.8 1.8 Grossed- Income Return 0.1 0.6 6.0 6.0 6.6 6.6 Capital Gains 0.4 -0.5 3.8 4.6 8.7 9.5 Total Return (gross of fees) 0.6 -0.9 9.4 11.0 15.8 16.5 Total Return (net of fees) 0.5 0.1 9.8 10.6 15.3 16.0 Rolling RBA Cash Rate 0.1 0.4 1.5 1.9 2.3 2.3 Investments can go up and down. Past performance is not necessarily indicative of future performance. Unless otherwise stated, Fund performance is gross of fees and assumes reinvestment of all distributions and has been grossed up for franking credits. Income return is calculated on an accruals basis rather than a cash receipts basis. Monthly franking return represents the yield from franking credits accrued over the month (calculated as a percentage of the Fund balance) and is an estimate only. Franking returns for periods greater than one month are calculated as the sum of the monthly franking returns. After each financial year franking returns are assumed to be reinvested in order to calculate franking returns for greater than one year. The inception date is 3 July 2012.

Fund Distributions Based on $100,000 Capital Invested at Fund Inception Assuming Distributed Capital Gains are Re-Invested Financial Year ending Financial Year ending Financial Year ending Financial Year ending Financial Year ending 30 June 2013 ($) 30 June 2014 ($) 30 June 2015 ($) 30 June 2016 ($) 30 June 2017 ($)

Distributed Income 3,982.53 5,412.98 5,813.77 5,505.13 5,515.83 Net Distribution Grossed-up 5,234.23 7,198.63 7,596.27 7,632.87 7,527.24 for Tax Credits Distribution calculation assumes income is distributed and all distributed capital gains are immediately re-invested. Distribution calculation is for illustrative purposes only. Distributions can go up and down. Past distributions are not necessarily indicative of future distributions. Fund Information as at 31 July 2017 Fund Key Statistics Asset Allocation (%)

Fund Size Total $8.6m Cash Deposits 26.5 Total Equity Allocation 73.5 Inception Date 3 July 2012 Consumer Discretionary 17.7 Unit Price – Withdrawal $1.3189 Consumer Staples 8.2 Buy/Sell Spread +0.20%/-0.20% Energy 2.7

Distribution Frequency Quarterly 6.3 Diversified Financials & Insurance 11.7 ICR 0.75% p.a.* Property 0.0 * Reduces to 0.45% p.a. of the when the proportion of the Fund in Cash investments is greater than 50%. Health Care --

Since Inception Industrials 8.6 Volatility (% p.a.) Information Technology 6.2 Fund 23.3 Materials 6.5

S&P/ASX 200 Accumulation Index 29.8 Telecommunication Services 3.0 Volatility discount to S&P/ASX 200 Utilities 2.7 22.0 Accumulation Index Total may not add to 100% due to rounding. Volatility is measured as standard deviation of daily returns. Lazard Australian Diversified Income Fund

Commentary As at 31 July 2017, the Fund is invested in 25 companies Looking ahead to the month of August, we will see a which meet the criteria of a dividend yield above the cash dividend receipt from . rate, capital appreciation potential and sustainability of dividend. Given between 1% and 3% of Fund assets will be invested in each qualifying company at month end, listed shares accounted for 73.5% of assets and 26.5% of Fund assets were invested in cash deposits.

As at 31 July 2017 the Fund’s aggregate forward yield continued to look attractive at 4.1%, or 5.1% when “grossed-up” for franking credits and tax deferral benefits. *This can be compared to the RBA annual cash rate at month end of 1.50%. The two RBA measurements of term deposit rates in the Australian market, the “Average Rate (all terms)” and the “Special Rate (all terms)” ended the month at 2.00% and 2.30%, respectively.

This means the expected annual yield from the Fund is 2.6% above the Month-end RBA cash rate and at a 3.6% premium on a “grossed-up” basis. The Fund’s expected excess yield over the RBA “Special Rate (all terms)” index is 1.8% and 2.8% on a “grossed-up” basis (with the Fund’s yield premium over the RBA “Average Rate” obviously higher).

July saw three payment dates; one of the holdings which paid a dividend over the month was (MQG). MQG is a holding company, which provides .

MQG consists of a number of financial services divisions, in FY17 the annuity-style businesses contributed approximately 70% of the group net profit, while the capital markets businesses made up the remaining 30%. MQG is now seeing an increase in the proportion of earnings derived from the less volatile operations of the business, which should help MQG sustain dividend payments in the medium term. The annual dividend increased by 17.5% to $4.70 per share in FY17, delivering a yield of more than 5%. We view the current dividend level to be maintainable throughout the earnings cycle, based on our assessment of MQG’s balance sheet strength and the shift of the business towards more stable revenue streams.

*Assumes tax deferred distributions are equivalent to 60% franked, based on an assumed marginal tax rate of 35% and an assumed holding period of 3 years. A higher assumed marginal tax rate, or a longer assumed holding period would have increased the assumed/equivalent franking level. Conversely, a lower assumed marginal tax rate, or a shorter assumed holding period would have decreased the assumed/equivalent franking level.

Disclaimer

The information in this Fact Sheet was prepared by Lazard Pacific Co ABN 13 064 523 619, AFS License 238432, and should not be considered a recommendation to purchase, sell or hold any particular security. Securities and sectors mentioned in this Fact Sheet are presented to illustrate companies and sectors in which the Fund may invest. Holdings are subject to change daily. This Fact Sheet contains general information only and does not take account of your individual objectives, financial situation or needs. Investors should get professional advice as to whether an investment in the Fund is appropriate having regard to their particular investment needs, objectives and financial circumstances before investing. Investors should obtain a copy of the current PDS for the Fund, available at www.lazardassetmanagement.com.au or from your IDPS operator, and consider the PDS before making any decision about whether to acquire, or to continue to hold, the Fund. Neither Lazard nor any member of the Lazard Group, including Lazard Asset Management LLC and its affiliates guarantees in any way the performance of the Fund, repayment of capital from the Fund, any particular return from or any increase in the value of the Fund. An investment in the Fund does not represent deposits or other liabilities of any member of the Lazard Group.

Lazard Asset Management Pacific Co • Level 39, 1 Macquarie Place • , NSW 2000 • www.lazardassetmanagement.com.au