Solaris Core Australian Equity Fund (Performance Alignment) (APIR: SOL0001AU) Monthly Investment Report as at 31 July 2018

Fund Performance

The Fund underperformed its benchmark for the month by 0.49%. Overweight holdings in Link Administration Holdings Limited, Reliance Worldwide Corporation Limited, Holdings Limited, Limited and CYBG PLC made a positive contribution to relative performance. The main detractors were overweight holdings in Pendal Group Limited, Insurance Group Limited, Limited and Evolution Mining Limited together with an underweight position in Corporation Limited.

Rolling 3 Years 5 Years Since Inception p.a. Returns Month FYTD 1 Year Quarter p.a. p.a. (31/08/2012)

Fund Gross Return^ 0.97% 5.86% 0.97% 18.64% 10.55% 12.04% 14.04%

Benchmark Return* 1.39% 5.84% 1.39% 14.59% 7.98% 9.17% 11.27%

Active Return -0.41% 0.01% -0.41% 4.04% 2.56% 2.87% 2.77% Fund Net Return^ 0.89% 5.72% 0.89% 17.39% 9.75% 11.24% 13.35% Benchmark Return* 1.39% 5.84% 1.39% 14.59% 7.98% 9.17% 11.27% Active Return (After fees) -0.49% -0.12% -0.49% 2.79% 1.76% 2.07% 2.08%

^ Performance is for the Solaris Core Australian Equity Fund (Performance Alignment) (APIR: SOL0001AU), also referred to as Class D units, and is based on month end prices before tax. Net performance is calculated after management fees and operating costs, excluding taxation. Gross performance is stated excluding all fees, costs and taxation. This is historical performance data. It should be noted the value of an investment can rise and fall and past performance is not indicative of future performance. * Benchmark refers to the S&P/ASX 200 Accumulation Index.

Significant Contributors Significant Detractors

Reliance Worldwide Corporation Limited (+11.0 %) Evolution Mining Limited (-20.5%) The company maintained momentum over July supported by During the month the company published the June Quarterly both positive market data in the US housing sector and Report which achieved gold production at the upper end of increasing investor confidence in the recent acquisition of UK its guidance, however relative to market expectations the cost based John Guest Holdings. and volume outlook for FY 2019 pulled the share price lower. Putting further pressure on the share price, Evolution’s largest CYBG PLC (+7.6%) shareholder La Mancha sold down 1/3 of their stake. They The bank performed well as it continues to progress the retain a 9.6% interest in the company. accretive all-share offer for Virgin Money, which remains on track subject to shareholder and regulatory approvals. Late in Telstra Corporation Limited (+8.4%) the month the company issued a trading update which was The company performed well in July following the broadly in line with market expectations. announcement of the Telstra 2022 strategy in June which highlighted a range of new items including a new simplified Link Administration Holdings Limited (+4.8%) pricing strategy and a reduction in workforce. The market was Following a weak June quarter, where the company was relieved in July after the introduction of new unlimited data impacted by an announcement in the federal budget plan was not as aggressive on price and margin as feared. concerning proposed legislative changes to the superannuation sector, the share price continued to recover in Altium Limited (-9.4%) July as investors focus on the growth prospects of the After a strong performance in financial year 2018, with the business. share price up +165.6%, the company consolidated in July as investors weighed up the current market valuation against the future earnings growth expectations for the business.

Contact us +61 1300 010 311 [email protected] www.solariswealth.com.au 1 Solaris Core Australian Equity Fund (Performance Alignment) (APIR: SOL0001AU) Monthly Investment Report as at 31 July 2018

Top 10 Stocks

Name Sector

BHP Billiton Limited Materials

Westpac Banking Corporation Financials

National Australia Bank Limited Financials

CSL Limited Health Care

Commonwealth Bank of Australia Financials

Macquarie Group Limited Financials

Woodside Petroleum Limited Energy

Australia and New Zealand Banking Group Limited Financials

Rio Tinto Limited Materials

Scentre Group Real Estate

Sector Allocation

9%

6%

3%

0%

-3% Active Weight Active

-6%

-9% Energy Utilities Materials Financials Industrials Real Estate Real Health Care Consumer Staples Consumer Information Technology Information Consumer Discretionary Consumer Telecommunication Services Telecommunication Cash Other & including futures

Contact us +61 1300 010 311 [email protected] www.solariswealth.com.au 2 Solaris Core Australian Equity Fund (Performance Alignment) (APIR: SOL0001AU) Monthly Investment Report as at 31 July 2018

Market Review

The S&P/ASX200 Accumulation Index finished up 1.4% for July with the Industrials sector (+1.7%) outperforming the Resources sector (+0.1%). The resources sector was impacted by softer commodity prices with the US oil price falling nearly 8% during the month, Copper finishing 6.5% lower and Aluminium finishing off 5.6%.

A number of company announcements supported the performance of Industrials. Reliance Worldwide (+11.0%) had positive momentum as the market gained confidence in the recent acquisition of UK based John Guest Holdings along with positive market data in the US housing sector. Telstra (+8.4%) performed well as investors digested the Telstra 2022 strategy update in late June. Clydesdale Bank (+7.6%) performed well as the company continues to progress the all-share offer for Virgin Money, subject to shareholder and regulatory approvals. On the other hand, companies experiencing a weak month included (-19.3%) which was impacted by dry weather conditions and reduced Australian crop chemical sales. The sectors in the portfolio to add active performance included Capital Goods (O/W Reliance Worldwide), Food & Beverage & Tobacco (O/W Treasury Wine Estates), and Transport (O/W Aurizon) while Telecommunications (U/W Telstra), Materials (O/W Evolution Mining), and Diversified Financials (O/W Pendal) detracted from active performance.

S&P/ASX 200 Top & Bottom performing sectors for the month ending 31 July:

The best performing sectors in the S&P/ASX200 Accumulation Index for the month were Telecommunication Services (+7.9%), Capital Goods (+7.8%), Commercial & Professional Services (+6.2%), Retailing (+4.5%) and Household & Personal Products (+3.9%). The worst performing sectors included Consumer Durables & Apparel (-7.6%), Automobiles & Components (-4.3%), Media (-1.6%), Utilities (-1.4%) and Software & Services (-1.2%).

S&P/ASX200 Top & Bottom performing stocks for the month ending 31 July:

The top 5 performing stocks in the S&P/ASX200 Accumulation Index for the month were Touch Group Ltd (+51.7%), Technology One Limited (+16.2%), Cimic Group Limited (+14.3%), Limited (+14.1%) and Limited (+13.9%). The bottom 5 performers included Limited (-39.5%), Bellamys Australia Limited (-29.2%), Evolution Mining Limited (-20.5%), Sandfire Resources NL (-19.4%) and Nufarm Limited (-19.3%).

Market Valuation & Earnings Estimates:

Market & Sector Market & Sector Marker & Sector EPS Growth PE’s Dividend Yield

Pro-rated to June FY18E FY19E FY20E FY18E FY19E FY20E FY18E FY19E FY20E

All Companies 8.4% 8.7% 3.7% 17.1x 15.7x 15.2x 4.2% 4.4% 4.6%

Banks -1.3% 3.5% 2.9% 12.7x 12.3x 11.9x 6.0% 6.1% 6.2%

Listed Property Trusts 3.1% 3.9% 4.3% 17.7x 17.1x 16.4x 4.4% 4.5% 4.7%

Resources 34.3% 12.8% -0.8% 15.2x 13.4x 13.6x 3.6% 4.0% 4.1%

Industrials ex-Banks 5.9% 10.3% 6.4% 20.8x 18.9x 17.8x 3.6% 3.9% 4.1%

Source: Solaris Investment Management, July 2018 Contact us +61 1300 010 311 [email protected] www.solariswealth.com.au 3 Solaris Core Australian Equity Fund (Performance Alignment) (APIR: SOL0001AU) Monthly Investment Report as at 31 July 2018

Market Outlook

As global growth continues to strengthen, risks remain including potential flow on impacts from the heightened trade frictions between the United States, China and Europe. Against the backdrop of strengthening global growth central banks in the United States, Europe, United Kingdom and Japan are expected to gradually normalise monetary policy settings.

Domestically, the Reserve Bank of Australia is expected to maintain its cautious outlook and continue to provide a supportive backdrop for the local economy. The health of the Australian housing market remains a concern, as clearance rates remain soft. In the financial sector an area of focus in the near term continues to remain whether any flow on impacts from the banking royal commission will hurt domestic credit growth. Revelations of poor lending standards in the major banks may lead to tighter and more conservative lending practices. In the resources sector an area of focus is the impact of trade tensions on Chinese demand for Australian commodities, and whether the current heightened price differential between high grade and low grade products is cyclical or structural in nature.

Some sectors of the Australian equity market are looking stretched, as pockets of “growth” and “small cap” companies look expensive. We remain cautiously optimistic, as the economy enters the 27th year of consecutive growth.

Contact Details

For further information, please contact Solaris’ distribution partner:

Pinnacle Investment Management Limited on 1300 010 311, alternatively, please email: [email protected]

Interests in the Solaris Core Australian Equity Fund (‘Fund’) (ARSN 128 859 898) are issued by Pinnacle Fund Services Limited, ABN 29 082 494 362, AFSL 238371, as responsible entity of the Fund. Pinnacle Fund Services Limited is not licensed to provide financial product advice. You should consider the Product Disclosure Statement of the Fund available at www.solariswealth.com.au in its entirety before making an investment decision. Solaris Investment Management Limited (‘Solaris’) (ABN 72 128 512 621 AFSL 330505) is the investment manager of the Fund. Pinnacle Fund Services Limited and Solaris believe the information contained in this communication is reliable, however its accuracy, reliability or completeness is not guaranteed. Any opinions or forecasts reflect the judgment and assumptions of Solaris and its representatives on the basis of information at the date of publication and may later change without notice. The information in this communication is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. This communication is for general information only. It has been prepared without taking account of any person’s objectives, financial situation or needs. Any persons relying on this information should obtain professional advice before doing so. Past performance is not a reliable indicator of future performance.

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