Solaris Core Australian Equity Fund (APIR: WHT0012AU) Monthly Investment Report as at 28 February 2018

Fund Performance

The Fund outperformed its benchmark for the month by 0.51%. Overweight holdings in Insurance Group Limited, Group, Holdings Limited and Limited and an underweight position in Limited made a positive contribution to relative performance. The main detractors were overweight holdings in Link Administration Holdings Limited, The Limited, Limited and Limited together with an underweight position in Limited.

Rolling 3 Years 5 Years 7 Years Inception p.a. Returns Month FYTD 1 Year Quarter p.a. p.a. p.a. (17/09/2008)

Fund Gross Return^ 0.95% 2.63% 10.92% 13.88% 7.79% 11.03% 9.91% 9.13% Benchmark Return* 0.36% 1.72% 8.27% 10.10% 5.07% 8.01% 7.93% 7.27% Active Return 0.59% 0.91% 2.65% 3.78% 2.71% 3.02% 1.98% 1.86% Fund Net Return^ 0.87% 2.38% 10.21% 12.78% 6.75% 9.96% 8.85% 8.10% Benchmark Return* 0.36% 1.72% 8.27% 10.10% 5.07% 8.01% 7.93% 7.27% Active Return 0.51% 0.67% 1.94% 2.68% 1.68% 1.95% 0.92% 0.84% (After fees)

^ Performance is for the Solaris Core Australian Equity Fund (APIR: WHT0012AU), also referred to as Class B 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

Altium Limited (+32.8%) The Star Entertainment Group Limited (-11.0%) Management reported their 1st half 2018 result which was The company reported their 1st half 2018 result with well ahead of market expectations. Revenue growth was 30% normalised net profit after tax of $120 million, up 12% which drove net profit growth of 51%. The outlook also looks compared to the prior corresponding period. The Queensland bright with the proliferation of through the rise of division achieved revenue growth of 8.5%, however earnings smart connected devices. for this division disappointed investors due to higher costs.

Insurance Australia Group Limited (+15.2%) The A2 Milk Company Limited (+47.5%) IAG’s 1st half 2018 result delivered a strong improvement in Revenue growth continued to surprise at the company’s 1st underlying performance with gross written premium growth half 2018 result with group revenue of NZD $435 million of 3.9%. Rate increases have offset claims inflation especially compared to NZD $256 million in the 1st half 2017. The in motor insurance and management also highlighted the company grew market share in key products across all ongoing momentum in commercial rates. regions, especially in China which delivered exceptional revenue growth. Costa Group Holdings Limited (+19.3%) Management announced their 1st half 2018 result with TABCORP Holdings Limited (-8.5%) earnings before interest tax and depreciation (EBITDA) of $62 The company announced their 2018 half year results and million which compared to $47 million in the prior reported normalised net profit of $82 million, down from corresponding period. The outlook statement was also $103 million in the 1st half 2017. Earnings in their wagering positive with the company upgrading 2018 net profit and media division were weaker due to cost growth driven by guidance to 25% growth from previous guidance of 20% increased customer acquisition activity. growth.

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Top 10 Stocks

Name Sector

BHP Billiton Limited Materials

Westpac Banking Corporation Financials

National Australia Bank Limited Financials

Commonwealth Bank of Australia Financials

CSL Limited Health Care

Macquarie Group Limited Financials

Australia and New Zealand Banking Group Limited Financials

Rio Tinto Limited Materials

Insurance Australia Group Limited Financials

Scentre Group Real Estate

Sector Allocation

9%

6%

3%

0% Active Weight Active

-3%

-6%

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

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Market Review

The S&P/ASX200 Accumulation Index finished up 0.4% for February with the Industrials sector (+0.6%) marginally outperforming Resources (-0.7%). The month was dominated by the company reporting season with earnings upgrades (78) outpacing earnings downgrades (72). The Resources sector through higher commodity prices was the main contributor to overall 2018 earnings upgrades (+1.4%) with Energy (+14.5%), Metals & Mining (+6.2%), and Steel (+16.8%) standing out.

Disappointing results were seen in , QBE, Suncorp, South32, , and Graincorp while earnings upgrades were seen in , BHP, Woodside Petroleum, Santos, Insurance Australia Group, Bluescope, A2 Milk, Altium, and . Encouragingly, the Australian market in February outperformed offshore markets including the S&P500 (-3.9%) and the FTSE100 (-4.0%).

S&P/ASX 200 Top & Bottom performing sectors for the month ending 28 February: The best performing sectors in the S&P/ASX200 Accumulation Index for the month were Food Beverage & Tobacco (+13.2%), Real Estate Management & Development (+12.3%), Pharmaceuticals & Biotechnology (+11.2%), Media (+8.5%) and Automobiles & Components (+4.7%). The worst performing sectors included Household & Personal Products (-16.3%), Retailing (-6.4%), Telecommunication Services (-6.0%), Energy (-3.7%) and Real Estate Investment Trusts (-3.3%).

S&P/ASX200 Top & Bottom performing stocks for the month ending 28 February: The top 5 performing stocks in the S&P/ASX200 Accumulation Index for the month were The A2 Milk Company Limited (+47.5%), Co. Holdings Limited (+35.7%), Altium Limited (+32.8%), Corporate Travel Management Limited (+25.7%) and Costa Group Holdings Limited (+19.3%). The bottom 5 performers included IPH Limited (-33.9%), Myer Holdings Limited (-31.3%), WiseTech Global Limited (-31.2%), Platinum Asset Management Limited (-22.9%) and Limited (-19.9%).

Market Valuation & Earnings Estimates:

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

Pro-rated to June FY17A FY18E FY19E FY17A FY18E FY19E FY17A FY18E FY19E

All Companies 12.2% 8.9% 5.9% 17.6x 16.2x 15.3x 4.1% 4.4% 4.6%

Banks 2.8% 1.8% 1.9% 12.9x 12.7x 12.5x 5.8% 5.9% 6.0%

Listed Property Trusts 2.7% 3.3% 3.3% 15.6x 15.1x 14.6x 4.8% 5.1% 5.3%

Resources 93.0% 30.7% 4.5% 19.8x 15.1x 14.5x 2.7% 3.6% 3.6%

Industrials ex-Banks 3.9% 6.3% 9.1% 20.2x 19.0x 17.4x 3.8% 3.9% 4.2%

Source: Solaris Investment Management, February 2018

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Market Outlook

Reporting season was broadly modestly positive with companies beating earnings expectations outweighing companies that missed earnings expectations.

Earnings for the larger capitalisation Australian listed companies were on average increased 1% which is better than what we normally experience during reporting season. However, Australian earnings continue to lag global peers with the US 2018 forecast earnings growth of 19.3% compared to Australia 5.8%. The increased volatility experienced globally during the month was overdue after a period of record global equity market gains and a somewhat complacent market. The sell off that occurred globally at the start of February was not driven by fundamentals. Global growth continues to exceed expectations, the recent US reporting season was strong and monetary policy is still very accommodative compared to historic norms.

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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