For Adviser Use Only Quarterly Performance Report Q2 2015

Peter Bull Head of Portfolio Construction, Equities +61 2 9276 4580 [email protected] Balanced Quarterly Performance Update: Q2 2015 James Foot Senior Investment Consultant +61 2 9276 4493 [email protected]

Quarterly Return % Market Commentary Markets had a more difficult time in the June quarter as concerns for Greece and the 2.0 broader Eurozone impacted investor sentiment. Developments in the Chinese share market also weighed heavily, particularly here in as the local market saw 1.0 losses. International markets fared a little better, with Europe the notable exception. Bond markets also endured a tougher quarter as investors continued to adjust to a 0.0 now broadly expected rate increase by the US Federal Reserve. However, some of these early quarter bond market losses were retraced as developments in Greece and -1.0 China saw investors again seeking out safe haven assets. The standout performer for the quarter was Japanese shares which registered small gains as investors continue -2.0 to warm to the reforms being undertaken to enhance returns to shareholders. Cash also delivered positive returns and proved its worth in more challenging market -3.0 conditions. Portfolio Objective Outperformance Portfolio Overview The portfolio delivered -1.49% for the quarter and 10.45% for the full financial year.

Long Term Target % The portfolio’s higher cash weighting was particularly beneficial during the weaker market conditions, while some of the newer currency positioning also added value over the quarter. There was also a positive contribution from the allocation to Japan, Growth 50.0 which was the standout regional equity market over the quarter. Defensive 50.0 The single largest contributor at a security level was iShares MSCI Japan ETF, while BetaShares British Pound ETF and BetaShares Australian High Interest Cash ETF also assisted performance. A reduction in the exposure to iShares Europe ETF and iShares Government Inflation ETF early in the quarter was also positive. The biggest stock contributors in Australian shares were , AGL Energy and ARB Corporation. Detractors included Trade Me Group, and Duluxgroup.

Outlook Despite the pullback, most markets remain expensive in our view and at the end of the quarter the portfolio maintained its more cautious positioning. This followed changes early in the quarter to reduce growth assets and build cash. Australian listed Current Asset Allocation % property saw the greatest reduction in order to lock in some of the very strong returns seen over the previous 18 months. Other changes included reducing the portfolio’s bond exposure. This followed most bond yields around the world having fallen to record low levels, meaning their ability to provide the defensive qualities we might Australian Shares 10.9 normally expect is significantly diminished. International Shares 22.7 Australian Property 7.8 The lower, and in many cases negative returns that most asset classes have seen this Alternatives 5.3 quarter highlights the speed with which markets can turn, particularly when they are Australian Bonds 13.1 starting from overvalued levels. We continue to believe that the investment International Bonds 6.2 environment over the next seven years is going to look very different to that of the last Inflation Linked Bonds 4.8 seven years as central bank stimulus is slowly reduced in key parts of the world. A valuation driven, dynamic asset allocation approach will be critical in such an Cash 29.2 environment to delivering returns in line with investors' longer term return objectives. For Adviser Use Only Quarterly Performance Report Q2 2015

Performance Overview

Compound Returns % Contribution to Return by Asset Class % Over the Quarter

Balanced CPI plus 2.5% pa 1.0 40 0.75 35 0.5

30 0.25 %

n 0.0 r

25 u t e

R -0.25 e v

i 20 t a l -0.5 u m

m 15

u -0.75 C

10 -1.0 s s y s s s s h t e e e d d d s r r r v n n n a e a a i o o o p t C h h B B B o a S S r l n n d l P r a n

5 a e a e i n

a n k t l i n l o

l a n a i o i i r a i l A t r t L t a a t r s a n n s t u r n

o u r s e i A e u t t 0 A t n a A I l n f Mar-13 I Jun-12 Dec-13 Sep-14 Jun-15 n I

Total Returns % 3 Months 6 Months 1 Year 3 Years (pa) Inception (pa) Balanced 1,2 -1.49 4.33 10.45 10.16 10.16 CPI + 2.5% pa 1.26 2.08 4.01 4.80 4.80 Outperformance -2.75 2.25 6.44 5.36 5.36 Risk Overview vs Peer Average 3

Returns and Drawdown % Since Inception Drawdown %

12 0 10 -0.5 8 s n

r -1 u

t 6 e R 4 -1.5 2 -2 0 0.0 -0.2 -0.4 -0.6 -0.8 -1.0 -1.2 -1.4 -1.6 -1.8 -2.0 -2.2 -2.4 -2.5 Max Drawdown Oct-12 Jun-13 Feb-14 Oct-14 Jun-15

Balanced Morningstar Balanced Balanced Morningstar Balanced

1. Investment performance is before tax and after the standard management fee of 0.61% (inclusive of GST). Investment performance is shown from 30/06/2012 and represents modelled performance only and assumes income received is reinvested. An individual investor’s performance will differ from the modelled performance depending on factors such as transaction timing, actual management fees, whether income is paid and any divergence from model portfolio weightings. 2. Management fees can be negotiated and may be less than the standard management fee. The portfolio may include exchange traded funds which charge management fees and these are an additional cost to individual investors and impact their return. 3. Peer Average is the Morningstar Australia Open End Multisector Balanced category, which contains multi-sector funds with 40.0 - 60.0 percent of their investments in the growth asets of shares and property. For Adviser Use Only Quarterly Performance Report Q2 2015

Allocation Overview

Asset Allocation % DAA vs Range % Current Quarter Last Quarter Range 100 70

80 60

60 50

40 40 30 20 20 0 Jun-12 Jan-13 Aug-13 Mar-14 Oct-14 Jun-15 10

Australian Shares International Shares 0 s s y y e s s s s h t t r e e e d d d s r r r r u v n n n a e e t i a a o o o

Australian Property International Property t C p p c h h a B B B o o u S S r r r n l n d l t r P P a n a e a s e

l i n

Global Infrastructure Alternatives a n t l k

i n a a l o l a r a i n o

i n f i a i A r t l r t o n t L a a i I t a s r t n

Australian Bonds International Bonds l n s n t u r a a o u r

s e i n A

b e t t A u r t o n a e l A I l n

Inflation Linked Bonds Cash t f I G n n I I

Equity Sector Regional Allocations % Australian Shares Sector Allocations % Last Quarter Current Quarter Last Quarter Current Quarter 12 4.5 4 10 3.5 3 8 2.5

6 2 1.5 4 1 0.5 2 0 y s s s y s s y e n l l l r r e g e g o a a i l a a i r i a i i t o t r i l p r n c e C l t i a e o a o n n

0 t s i t c t h s i n a n a K K n t a E t u i t a U S l

l c n h a a e n i U U d e i r r a c a r - u p p M k F n r c e x e e I r e

t a a s m e i T s a H m J J m - m u D u e n M A x o s r A p o

e c i n g h e o t

t e r c o n l

r i a i m u f C e

o i g u m E r c T s r N e a n o f P o m n C I E

Current Asset Allocation Vs Peer Average % 1

Actual Active Allocation Asset Class Weight Underweight Overweight 10.9 Australian Shares -8.1 22.7 International Shares 2.1 7.8 Australian Property 4.3 5.3 Alternatives -1.0 13.1 Australian Bonds -6.6 6.2 International Bonds -4.5 4.8 Inflation Linked Bonds 0.0 29.2 Cash 11.3 -10 -8 -6 -4 -2 0 2 4 6 8 10 12

1. Peer Average is the Morningstar Australia Open End Multisector Balanced category, which contains multi-sector funds with 40.0 - 60.0 percent of their investments in the growth asets of shares and property. For Adviser Use Only Quarterly Performance Report Q2 2015

Portfolio Holdings

Morningstar/ Morningstar® Chant West/ Current Market Economic Lonsec Portfolio Capitalisation Holding Code Moat Rating™ Rating Weight (%) Price ($) Yield (%) ($ million) Australian Shares 10.89 Consumer Discretionary ARB Corp. Ltd. ARB Narrow Reduce 0.79 13.03 2.23 1,031 City Entertainment Group Ltd SKC Narrow Hold 0.71 3.75 5.02 2,203 InvoCare Ltd. IVC Narrow Hold 0.71 12.10 3.02 1,331 Sky Network Television Ltd. SKT Wide Accumulate 0.68 5.37 5.26 2,090 Trade Me Group Ltd. TME Wide Accumulate 0.63 3.02 5.02 1,198 Consumer Staples Woolworths Ltd. WOW Narrow Accumulate 0.73 26.96 5.16 34,055 Financials Platinum Asset Management Ltd. PTM Narrow Hold 0.75 7.48 6.28 4,353 ASX Ltd. ASX Wide Reduce 0.73 39.90 4.57 7,724 Health Care Sonic Healthcare Ltd. SHL Narrow Hold 0.79 21.37 3.23 8,578 Ansell Ltd. ANN Narrow Accumulate 0.65 24.09 2.01 3,689 Information Technology IRESS Ltd. IRE Narrow Reduce 0.75 10.12 4.10 1,610 Materials BHP Billiton Ltd. BHP Narrow Accumulate 0.69 27.05 5.44 144,008 DuluxGroup Ltd DLX Narrow Accumulate 0.67 5.72 3.76 2,222 Ltd S32 None Accumulate 0.05 1.79 - 9,530 Telecommunication Corp. Ltd. TLS Narrow Hold 0.76 6.14 4.89 75,068 Utilities AGL Energy Ltd. AGK Narrow Reduce 0.80 15.55 4.05 10,469

International Shares 22.74 iShares MSCI Japan ETF IJP - - 5.76 16.71 0.49 22,649 International Shares Core (Unhedged) INT0017AU - 4 Apples 4.59 0.80 2.76 - International Shares Core (Hedged) INT0016AU - 4 Apples 4.58 0.41 0.39 - iShares MSCI Emerging Markets ETF IEM - - 4.36 51.58 1.26 38,414 iShares MSCI BRIC ETF IBK - - 1.95 48.68 1.45 365 Betashares GBP ETF POU - - 1.50 20.39 - 6 For Adviser Use Only Quarterly Performance Report Q2 2015

Portfolio Holdings

Morningstar/ Morningstar® Chant West/ Current Market Economic Lonsec Portfolio Capitalisation Holding Code Moat Rating™ Rating Weight (%) Price ($) Yield (%) ($ million) Australian Property 7.78 GPT Group GPT Narrow Hold 1.44 4.28 4.95 7,214 Westfield Corp WFD Narrow Accumulate 1.16 9.12 4.62 18,952 SCG Narrow Hold 1.09 3.75 2.72 19,918 Federation Centres FDC Narrow Hold 0.85 2.92 5.79 4,169 Property Group DXS Narrow Hold 0.85 7.30 5.62 6,610 GMG Narrow Accumulate 0.85 6.27 3.54 10,944 Shopping Centres Australasia Property Group SCP None Hold 0.84 2.13 5.35 1,382 Australia SGP Narrow Hold 0.70 4.10 5.85 9,630

Alternatives 5.26 Ibbotson Diversified Alternatives Trust INT0097AU - Investment Grade 5.26 0.71 0.50 -

Australian Bonds 13.10 iShares Composite Bond ETF IAF - - 13.10 106.28 3.03 202

International Bonds 6.24 Ibbotson International Bonds Active (Hedged) INT0082AU - Investment Grade 6.24 1.00 8.21 - Trust

Inflation Linked Bonds 4.81 iShares Government Inflation ETF ILB - - 4.81 113.80 1.30 32

Cash 29.17 Australian Dollar - - 14.60 - 1.44 - BetaShares Australian High Interest Cash ETF AAA - - 14.57 50.18 3.06 781 For Adviser Use Only Quarterly Performance Report Q2 2015

Transactions over the Quarter

Holding Asset Class Change Effect Reason

BHP Billiton Limited Australian Shares N Added Changes in the relation between fundamental quality metrics and market price Australian Shares M Removed Better opportunities exist based on stock ranking process Australian Shares M Removed Better opportunities exist based on stock ranking process CSL Limited Australian Shares M Removed Better opportunities exist based on stock ranking process Limited Australian Shares M Removed Better opportunities exist based on stock ranking process Resmed Inc Australian Shares M Removed Better opportunities exist based on stock ranking process Singapore Telecommunications Ltd Australian Shares M Removed Better opportunities exist based on stock ranking process BetaShares British Pound ETF International Shares N Added Change in asset class ranking based on Dynamic Asset Allocation process Betashares US Dollar ETF International Shares M Removed Change in asset class ranking based on Dynamic Asset Allocation process Ibbotson International Shares Core International Shares N Added Improved diversification in achieving real return targets (Hedged) Trust Ibbotson International Shares Core International Shares N Added Improved diversification in achieving real return targets (Unhedged) Trust iShares Asia 50 ETF International Shares M Removed Change in asset class ranking based on Dynamic Asset Allocation process iShares Core S&P 500 ETF International Shares M Removed Change in asset class ranking based on Dynamic Asset Allocation process iShares Europe ETF International Shares M Removed Change in asset class ranking based on Dynamic Asset Allocation process iShares MSCI BRIC ETF International Shares N Added Change in asset class ranking based on Dynamic Asset Allocation process iShares MSCI Emerging Markets ETF International Shares ] Increased Change in asset class ranking based on Dynamic Asset Allocation process iShares MSCI Japan ETF International Shares [ Decreased Change in asset class ranking based on Dynamic Asset Allocation process Goodman Group Australian Property N Added Improved position in the stock ranking process Investa Office Fund Australian Property M Removed Better opportunities exist based on stock ranking process Novion Property Group Australian Property M Removed Better opportunities exist based on stock ranking process SCA Property Group RE Ltd. Australian Property N Added Changes in quality of company earnings at latest review Stockland Australian Property N Added Improved position in the stock ranking process Westfield Corporation Australian Property N Added Improved position in the stock ranking process Ibbotson Diversified Alternatives Trust Alternatives ] Increased Change in asset class ranking based on Dynamic Asset Allocation process Ibbotson International Bonds Active International Bonds [ Decreased Change in asset class ranking based on Dynamic Asset (Hedged) Trust Allocation process iShares Government Inflation ETF Inflation Linked Bonds [ Decreased Change in asset class ranking based on Dynamic Asset Allocation process For Adviser Use Only Quarterly Performance Report Q2 2015

Transactions over the Quarter

Holding Asset Class Change Effect Reason

BetaShares Australian High Interest Cash Cash ] Increased Better return within asset class ETF Platform Cash Cash [ Decreased Rebalancing allocation within asset class

Portfolio Overview

This is an actively managed diversified portfolio of growth assets - such as Australian and global equities and property – and defensive asset classes - such as cash and fixed interest securities. In general, the portfolio’s long term average exposure will be around 50% growth assets and 50% defensive assets. Within allowable asset allocation ranges, we manage allocations actively depending on market conditions.

Diversified Managed Accounts Growth Defensive Asset Allocation Return Objective Time Horizon Risk Profile Assets % Assets % Defensive CPI+ 0.75% Rolling 1 year Low 15 85

Conservative CPI+ 1.0% Rolling 3 years Low to Medium 30 70

Balanced CPI+ 2.5% Rolling 5 years Medium 50 50

Growth CPI+ 3.5% Rolling 7 years Medium to High 70 30

High Growth CPI+ 4.5% Rolling 9 years High 85 15

High Growth Plus CPI+ 5.0% Rolling 10 years High 95 5

Diversified Income CPI+ 2.0% Rolling 4 years Medium 40 60

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