Realindex Australian Share Fund

Fact sheet - 31 Dec 2015

Fund strategy Fund facts The Realindex Australian Share Fund uses the RAFI® methodology in the Benchmark S&P / ASX 200 Accumulation Index construction of its portfolios which selects and weights companies Funds under management $3004 Million according to their economic footprint defined by fundamental measures of Inception Date 17 November 2008 company size (sales, cash flow, book value and dividends). The portfolio is further enhanced by applying additional factors such as quality of earnings and debt coverage.

Commentary The Realindex Australian Shares Fund returned +5.09% (gross of fees) during the fourth quarter of 2015, compared to the S&P/ASX 200 Accumulation Index benchmark which returned +6.48%.

Value (4.2%) underperformed Growth (8.5%) during the quarter; however, of more significance was the dismal performance of the resources sector, (S&P/ASX200 Resources -9.0% v S&P/ASX200 Industrials +9.1%) as commodities continued to fall (Brent Crude -23.2% and Iron Ore -29.8%).

Despite the commodity slide, the Australian dollar appreciated against the USD (+3.8%) and against major currencies (EUR +6.9%, JPY +4.1% and CNY +6.5%) and other commodity currencies (CAD +8.0%, BRL +4.2% and ZAR +15.9%).

The portfolio’s underperformance was almost entirely driven by sector allocation as opposed to stock selection. Most notably, an overweight to Materials detracted significantly, whilst underweights to Financials and Health Care sectors also weighed on relative performance.

The portfolio’s large overweight holding in BHP Billiton (-19.6%) was the largest detractor as the company faced not only sliding commodity prices but the fallout from the tailings dam failure in Brazil. Overweights to steel companies Sims Metal (-24.1%) and Arrium (-33.3%) also detracted.

In the Financials sector (+10.7%) underweights to (+17.6%) and (+17.1%) detracted the most value after all the banks raised mortgage lending rates which will lead to increase margins.

The Health Care sector (+12.4%) continued its strong momentum with underweights to CSL (+18.1%), (+22.3%), Ramsay (+16.2%) and Cochlear (+14.5%) all detracting value. However overweights to Australian Pharmaceutical (+29.1%) and Fisher and Paykel (+29.6%) gave some relief.

At a stock level, the portfolio suffered from not holding market darlings Domino’s Pizza (+43.5%) and (+49.4%). With forward PEs 52x and 80x respectively, these stocks are very expensive and priced for a very high future growth hurdle. Underweights to Seek (+28.2%, PE 28x) and Treasury Wine (+28.8%, PE 33x) also detracted value. An overweight to the struggling (+53.8%) was the largest contributor, whilst not holding law firm Slater and Gordon (-71.9%) also added value as the stock fell sharply on the potential impact of regulatory changes in the UK.

The portfolio continues to offer a valuation discount to the market-cap benchmark, as measured by price-to-book (2.2x vs. 2.4x) and price to sales (2.2x vs. 2.9x). The portfolio also had a dividend yield higher than the benchmark (5.1% vs. 4.8%).

Note: Percentage figures in parenthesis show total return in Australian dollars for the period 30 September 2015 to 31 December2015 unless otherwise noted.

Since Gross performance 1 month 3 month 6 month 1 year 2 year 3 year 5 year inception Realindex Australian Share Fund 2.48% 5.09% -2.24% 0.15% 2.43% 8.58% 7.38% 10.94% ASX 200 Accum 2.73% 6.48% -0.53% 2.56% 4.07% 9.19% 6.97% 10.18% Outperformance -0.25% -1.39% -1.71% -2.41% -1.65% -0.61% 0.41% 0.76%

Top 10 holding comparison ASX 200 ASX 200 as at 31 Dec 2015 Fund Accum Active Weight Sector Holding comparison Fund Accum Active Weight Commonwealth Bank of 7.89% 10.56% -2.67% Energy 5.48% 3.98% 1.50% Westpac Banking Corporation 7.11% 8.09% -0.98% Materials 17.08% 11.94% 5.14% BHP Billiton 6.15% 4.14% 2.01% Industrial 7.88% 7.82% 0.06% Australia and Banking Group 5.57% 5.88% -0.31% Consumer Discretionary 6.06% 4.74% 1.32% Corporation Limited 4.88% 4.96% -0.08% Consumer Staples 9.93% 7.15% 2.78% 4.88% 5.76% -0.88% Healthcare 3.66% 6.86% -3.20% Limited 4.64% 3.38% 1.26% A-REIT 5.90% 7.51% -1.61% Woolworths Ltd 3.54% 2.25% 1.29% Financial-x-A-REIT 35.44% 41.27% -5.83% Ltd 1.94% 1.47% 0.47% Information Technology 0.50% 0.93% -0.43% Limited 1.90% 1.37% 0.53% Telecoms 6.05% 5.49% 0.56% Utilities 2.02% 2.31% -0.28%

Top 5 relative contributors for the quarter Value added Top 5 relative detractors for the quarter Value lost Metcash 0.16% BHP Billiton -0.59% Chorus 0.08% Commonwealth Bank of Australia -0.28% Spotless Group Holdings 0.07% CSL -0.20% Air New Zealand Ltd 0.06% WorleyParsons Ltd -0.12% Australian Pharmaceutical Industries Ltd 0.06% Sims Metal Management Limited -0.10%

Contact To find out more, please contact us on 1300 809 204 or email [email protected]. Disclaimer Realindex Investments Pty Limited ABN 24 133 312 017 AFSL 335381. The Realindex Australian Share Fundoption (Fund) described in this document is offered by Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232 468. This document is intended to provide general information only. You should assess whether the information is appropriate to you before making an investment decision. The performance figures used in this document are sourced from the Fund’s relevant benchmark index and from actual performance figures achieved before fees and expenses. Past performance is no indication of likely future performance. The fees payable by investors in the Fund may be negotiated and can differ between investors. For this reason the performance figures used in this document are shown before fees and costs. Investors should have regard to the Information Memorandum (available by contacting the Realindex team on 1300 809 204) or their negotiated fee agreement for further information on the fees and costs. Neither the Commonwealth Bank of Australia nor any of its subsidiaries guarantees or stands behind the performance of the Fund or the repayment of capital. An investment in the Fund is not a deposit or liability of the Bank and is subject to investment risk including loss of income and capital. RAFI and Fundamental Index are trademarks of Research Affiliates LLC, and are used with permission. Patent pending: WO 2005/076812, WO 2007/078399. Research Affiliates, LLC, is a U.S. Securities and Exchange Commission registered investment advisor. Research Affiliates, LLC and its related entities do not warrant the accuracy of the information provided herein, either expressed or implied, for any particular purpose.