Solaris Core Australian Equity Fund (Performance Fee Option) (APIR: WHT0017AU) Monthly Investment Report As at 31 July 2020

Solaris Core Australian Equity Fund (Performance Fee Option) (APIR: WHT0017AU) Monthly Investment Report as at 31 July 2020

Fund Performance

The fund underperformed its benchmark for the month by 0.32%. Overweight holdings in Goodman Group, Northern Star Resources Ltd and Charter Hall Group and underweight positions in AMP Limited and Australia and New Zealand Banking Group Limited made a positive contribution to relative performance. The main detractors were overweight holdings in Aurizon Holdings Limited and Woodside Petroleum Limited together with underweight positions in Afterpay Limited, Newcrest Mining Limited and Fortescue Metals Group Ltd.

Rolling 3 Years 5 Years 7 Years Since Inception p.a. Returns Month FYTD 1 Year Quarter p.a. p.a. p.a. (31/08/2012)

Fund Gross Return^ 0.27% 6.38% 0.27% -12.25% 5.60% 6.05% 8.34% 10.22%

Benchmark Return* 0.50% 7.62% 0.50% -9.87% 5.37% 5.15% 6.78% 9.40%

Active Return -0.23% -1.24% -0.23% -2.38% 0.23% 0.90% 1.56% 0.82%

Fund Net Return^ 0.19% 6.12% 0.19% -13.09% 4.58% 5.03% 7.30% 9.52%

Benchmark Return* 0.50% 7.62% 0.50% -9.87% 5.37% 5.15% 6.78% 9.40%

Active Return (After fees) -0.32% -1.50% -0.32% -3.23% -0.79% -0.12% 0.52% 0.12%

^ Performance is for the Solaris Core Australian Equity Fund (APIR: WHT0017AU), also referred to as Class C 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

Northern Star Resources +15.7% Fortescue Metals Group Ltd +25.7% The gold mining company benefitted from the strength in the price The West Australian based iron ore producer experienced a positive of gold during the month (+10.3%), which remains in demand as a month supported by the strength in the price of iron ore. During the store of value given the large global stimulus in place due to the month management confirmed record iron ore shipment levels of uncertain economic backdrop. 47.3 million tonnes was reached during the June quarter, which was ahead of investors expectations. Goodman Group +14.0% The global industrial and logistics property owner, manager and Aurizon Holdings Limited -9.6% developer continued to benefit from demand for its logistics, The rail freight operator underperformed during the month due to fulfilment and industrial space. Sentiment in the sector remains weakness in the price of coal. Late in June the ACCC lodged an positive as demand from online sales supports demand for logistics application with the High Court to review the dismissal of an appeal infrastructure. that cleared the way for Aurizon to sell the Acacia Ridge Terminal to Pacific National. AMP Limited -21.0% AMP underperformed during the month after management released Newcrest Mining Limited +11.6% a profit warning and expect underlying profit for its retained The gold mining company headquartered in Melbourne, performed businesses of $140-150 million which was below investors’ strongly over the month assisted by the strength in the price of gold expectations. and positive operational performance with the production of 573,000 ounces of gold (up 7% on the prior quarter).

Top 10 Stocks

Name Sector

BHP Group Limited Materials

CSL Limited Health Care

Commonwealth Bank of Australia Financials

National Australia Bank Limited Financials

Westpac Banking Corporation Financials

Macquarie Group Limited Financials

Telstra Corporation Limited Communication Services

Rio Tinto Limited Materials

Woolworths Group Limited Consumer Staples

Goodman Group Real Estate

Sector Allocation

9% 6% 3% 0% -3%

-6% Active Weight Active

-9%

Energy

Utilities

Materials

Financials

Industrials

Real Estate Real

Health Care Health

futures

Consumer Staples Consumer

Cash & Other including Other & Cash

Information Technology Information

Consumer Discretionary Consumer Communication Services Communication Market Valuation & Earnings Estimates:

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

Pro-rated to June FY20E FY21E FY22E FY20E FY21E FY22E FY20E FY21E FY22E

All Companies -15.8% 2.3% 14.3% 19.2x 18.8x 16.4x 3.5% 3.5% 4.1% Banks -25.8% -0.7% 18.5% 13.6x 13.6x 11.5x 4.3% 4.4% 5.5% Listed Property Trusts -5.5% 1.3% 8.9% 14.0x 13.8x 12.7x 5.5% 5.9% 6.5% Resources -7.3% -2.2% 2.8% 15.2x 15.6x 15.2x 4.0% 3.5% 3.5% Industrials ex-Banks -14.0% 6.3% 17.8% 24.3x 22.9x 19.4x 3.1% 3.3% 3.8%

Market Review The S&P/ASX 200 Accumulation Index rallied +0.5% over the month of July. After a positive start to the month the index faded away as the number of COVID-19 cases in Victoria began to surge and the associated movement and travel restrictions dampened hopes of a quicker than expected recovery. Global news of promising vaccine and treatment prospects supported sentiment through the month, even as the daily number of new cases globally remains high. The Australian dollar finished stronger (+3.5%), as did Gold (+10.3%) which is perceived as a hedge against uncertain macroeconomic and geopolitical conditions and Iron Ore (+7.9%) which was stronger due to supply constraints in Brazil.

Over the month the top three moves within the S&P/ASX 200 Accumulation Index were Netwealth Group (+33.9%) which continued to received positive net inflows, ALS Limited (+29.4%) after management presented financial results to 30 June 2020 that were ahead of investor expectations and Orocobre (+28.6%) after management reported strong operating performance with the cash cost of sales at the lowest level achieved in three years. The bottom three performers were Avita Therapeutics (-32.6%) was impacted by a reduction in burns injuries in the United States, Adbri (-30.5%) announced that Alcoa Limited has elected to not renew a lime supply contract and AMP Limited (-21.0%) provided an updated on 1H 2020 results that was softer than investors’ expectations.

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 Consumer Durables & Apparel (+13.9%), Materials (+5.8%), Telecommunication Services (+5.2%), Software & Services (+4.6%) and Food & Staples Retailing (+4.3%). The worst performing sectors included Household & Personal Products (-9.6%), Real Estate Management & Development (-8.2%), Energy (-6.6%), Capital Goods (- 6.0%) and Pharmaceuticals & Biotechnology (-5.9%).

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 Netwealth Group Limited (+33.9%), ALS Limited (+29.4%), Orocobre Limited (+28.6%), Fortescue Metals Group (+25.7%) and Oz Minerals Limited (+24.4%). The bottom 5 performers included Avita Therapeutics Inc. (-32.6%), Adbri Limited (-30.5%), AMP Limited (-21.0%), Monadelphous Group Limited (-17.7%) and Ooh!Media Limited (-17.6%).

Market Outlook As we approach company reporting season in August, the balance of risks for the market is beginning to look more fairly priced. The bargains that were plentiful in March are harder to find, while the optimism being priced into some sectors of the market are making pockets of high growth and technology focused companies look expensive. The consensus one year forward expected ‘Price to Earnings’ ratio for the market is elevated at 18.9x. This is due to two factors, firstly investors are factoring in a component of COVID-19 earnings impacts to be “one-off” in nature and secondly investors are factoring in lower discount rates which raises valuations.

During the crisis many companies removed earnings guidance and we expect during reporting season they will be reluctant to provide forward guidance given the high degree of uncertainty. However, a lot of the hard work has already been done by corporates in suspending or cutting dividends and for the market we expect dividends to resume based on sensible payout ratios. The banking sector for example has been guided by APRA to maintain the payout ratio at below 50%.

Although the risk of the virus spread in Australia remains elevated (particularly in Victoria and New South Wales), the improving virus management, the potential for a vaccine and the large economic stimulus in place has given investors’ confidence that corporates and households will be able to successfully ‘build a bridge’ through this period of uncertainty. We are focused on companies with strong balance sheets, strong market positions and strong management teams that will be able to see through this volatile period and take advantage of opportunities that arise in the future. We expect this environment will create significant opportunities for stock selection.

Source: Solaris Investment Management, July 2020

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.