Fitzpatricks Mda Specific Portfolios

FITZPATRICKS MDA SPECIFIC PORTFOLIOS

Monthly Report, June 2017

TOP 10 POSITIONS AUSTRALIAN EQUITIES – DIRECT • Australian equities recorded a positive return over the month, with the Portfolio Westpac Banking Corporation outperforming the market, returning 0.9% in comparison to 0.2% for the S&P ASX 200 Accumulation Index. CSL Limited • The Healthcare sector continued to contribute positively to overall returns, closing the month up 6%. The Portfolio benefited from an overweight position to this Transurban Group sector, with Resmed Inc (RMD) and CSL Limited (CSL) being two of the largest contributors. Macquarie Atlas Roads Group • Additional positive contributions came from the Technology sector, which was up Magellan Financial Group Limited 1.4% for the month. The Portfolio’s underweight position to Resources provided further support as commodities continued to unwind. Commonwealth Bank of Australia • The Portfolio exited MG Unit Trust (MGC) on news that the company was Australia and New Zealand Banking reviewing the Price Stability Mechanism and the risk of an outcome that would be Group Limited detrimental to shareholders. Other portfolio changes this month included a sale out of Carsales Limited (CAR). $5,000 Challenger Limited MDA Direct Australian Equities Portfolio S&P ASX 200 Accumulation Index ResMed Inc. $4,500

$4,000 Lovisa Holdings Limited $3,500

$3,000

Source: Fitzpatricks, Iress. Performance from 30 $2,500 September 2002 to 30 June 2017. Performance is after investment management fees, excludes administration $2,000 and advice fees and assumes re-investment of all distributions. Past performance is not a reliable indicator of future performance. $1,500

$1,000

$500 PERFORMANCE Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16

Performance Volatility Inception

2 Years 3 Years 5 Years Since Since 1 Month 3 Months 6 Months 1 Year p.a. p.a. p.a. Inception Inception Date

Direct Australian Equities Portfolio 0.9% -0.5% 4.6% 9.6% 7.5% 7.7% 13.7% 11.2% 12.5% 30/09/02

S&P ASX 200 Accumulation Index 0.2% -1.6% 3.2% 14.1% 7.1% 6.6% 11.8% 9.2% 12.9% 30/09/02

Source: Fitzpatricks, Iress. Performance from 30 September 2002 to 30 June 2017. Performance is after investment management fees, excludes administration and advice fees and assumes re-investment of all distributions. Past performance is not a reliable indicator of future performance.

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AUSTRALIAN EQUITIES – MANAGED FUNDS

$1,900 • The Portfolio performed better Australian Equities (Managed Funds) Portfolio than the broader Australian $1,800 S&P ASX 200 Accumulation Index

market, with encouraging returns $1,700

from our underlying managers. $1,600 • The Atrium Equity Opportunities $1,500 Fund returned 0.9% for the month $1,400 with positive contributions coming $1,300 from Diversified Financials such $1,200 as Magellan Financial Group and $1,100 Challenger Limited. The Fund $1,000

continued to benefit from an $900 underweight position to more Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 cyclical sectors such as Resources. Source: Fitzpatricks, Iress. Performance from 30 September 2010 to 30 June 2017. Performance is after investment management fees, excludes administration and advice fees and assumes re-investment of all distributions. Past • SGH ICE Professional Investor performance is not a reliable indicator of future performance. Fund returned 2.1%, outperforming the S&P ASX Small Ordinaries Accumulation Index. The return for the Fund came from a variety of industries, with particularly strong returns from A2 Milk and IDP Education. • Bennelong ex-20 Australian Equities Fund continued to contribute positively throughout the month, returning 1.4%. The top holdings in Aristocrat Leisure and Fisher & Paykel Healthcare continued their recent trend to boost returns for the Fund, up 3.5% and 8.3% respectively. PERFORMANCE

Performance Volatility Inception

2 Years 3 Years 5 Years Since Since 1 Month 3 Months 6 Months 1 Year p.a. p.a. p.a. Inception Inception Date

Australian Equities 1.4% 1.5% 4.6% 5.9% 7.6% 7.8% 12.3% 8.4% 10.5% 30/09/10 (Managed Funds) Portfolio

S&P ASX 200 Accumulation Index 0.2% -1.6% 3.2% 14.1% 7.1% 6.6% 11.8% 8.0% 11.7% 30/09/10

Source: Fitzpatricks, Iress. Performance from 30 September 2010 to 30 June 2017. Performance is after investment management fees, excludes administration and advice fees and assumes re-investment of all distributions. Past performance is not a reliable indicator of future performance.

INTERNATIONAL EQUITIES

• The International Equities Portfolio performed in line with the MSCI World ex Australia (AUD) index. • US equity markets remained generally flat, primarily due to a reversal in the Technology sector. The allocation to the Antipodes Global Fund - Long Only outperformed the market by approximately 1% with returns boosted by exposures to global Financials and Retail sectors. The Magellan Global Equities strategy was lower owing to an overweight position in

Technology stocks. $3,500 International Equities Portfolio MSCI World ex Australia (Net in AUD) • Markets had largely priced in the MSCI World ex Australia (Net Local) $3,000 US Federal Reserve’s June rate rise.

Generally seen as a sign of increased $2,500 confidence in the US economy, sectors such as Financials were $2,000 further supported by the Federal Reserve’s action. $1,500

• Emerging markets continued last $1,000 month’s trend and outperformed the $500 broader developed market. Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Source: Fitzpatricks, Iress. Performance from 30 September 2002 to 30 June 2017. Performance is after investment management fees, excludes administration and advice fees and assumes re-investment of all distributions. Past performance is not a reliable indicator of future performance.

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INTERNATIONAL EQUITIES (cont.) PERFORMANCE

Performance Volatility Inception

2 Years 3 Years 5 Years Since Since 1 Month 3 Months 6 Months 1 Year p.a. p.a. p.a. Inception Inception Date

International Equities Portfolio -2.7% 4.8% 7.0% 16.1% 9.0% 14.3% 16.5% 8.0% 10.0% 30/09/02

MSCI World ex Australia, (Net in AUD) -2.6% 3.6% 4.2% 14.7% 7.3% 13.0% 18.2% 6.3% 11.5% 30/09/02

MSCI World ex Australia (Net Local) 0.0% 2.8% 8.4% 18.9% 7.6% 7.9% 13.2% 8.3% 13.2% 30/09/02

LIQUID ALTERNATIVES

$1,500 • Local equity market neutral Alternatives Portfolio managers did well during a RBA Cash Rate month when domestic equity $1,400 markets were driven by company fundamentals. $1,300

• Allocations to the Tasman Market $1,200 Neutral Fund generated a strong 3.2% return for June. The Fund’s $1,100 long positions worked particularly well in June, and its allocations $1,000 to Asia continued to generate consistent, positive returns. $900 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 • The Bennelong Long Short Source: Fitzpatricks, Iress. Performance from 30 September 2010 to 30 June 2017. Performance is after investment Equity Mandate also contributed management fees, excludes administration and advice fees and assumes re-investment of all distributions. Past performance is not a reliable indicator of future performance. positively returning 1.2%, with significant contributions coming from the Fund’s pair trades. • CTA and Macro managers were impacted late in the month on the back of rising bond yields and the strengthening Euro. PERFORMANCE

Performance Volatility Inception

2 Years 3 Years 5 Years Since Since 1 Month 3 Months 6 Months 1 Year p.a. p.a. p.a. Inception Inception Date

Alternatives Portfolio -0.1% 0.2% 1.1% -2.8% 1.2% 2.5% 4.2% 4.5% 3.7% 30/09/10

RBA Cash Rate 0.1% 0.4% 0.7% 1.5% 1.7% 1.9% 2.3% 2.9% 0.3% 30/09/10

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ENHANCED FIXED INCOME

• The Atrium Enhanced Fixed Income Fund (AEFI) returned $1,080 Atrium Enhanced Fixed Income Fund 0.2% for June and achieving RBA Cash Rate Bloomberg AusBond Composite Bond Index - All Maturities (TR) over 3% for the Financial Year. $1,060 This was a pleasing result for investors given the extremely $1,040 low yielding environment for bonds. $1,020

• We are currently conducting $1,000 due diligence on a highly

prospective manager to be $980 incorporated into the Portfolio in

the coming weeks. $960 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 • Allocations to the Smarter Source: Fitzpatricks, Iress. Performance from 1 September 2015 to 30 June 2017. Performance is after investment management fees, excludes administration and advice fees and assumes re-investment of all distributions. Past Money Active Cash Fund performance is not a reliable indicator of future performance. (SMAC) returned 0.3% in June, the returns continuing to be supported by the strong performance of Australian senior bank debt. • The JP Morgan Global Strategic Bond Fund (GSBF) returned 0.2% for the month. Following a very strong contribution to performance in 2016, the Fund saw a strong contribution to performance in the first half of 2017 from Investment Grade and High Yield credit. PERFORMANCE

Performance Volatility Inception

2 Years 3 Years 5 Years Since Since 1 Month 3 Months 6 Months 1 Year p.a. p.a. p.a. Inception Inception Date

Atrium Enhanced Fixed Income Fund 0.2% 0.6% 1.6% 3.1% - - - 3.2% 0.6% 01/09/15

Bloomberg AusBond Composite Bond -0.9% 1.0% 2.3% 0.2% 3.6% 4.3% 4.3% 2.8% 3.9% 01/09/15 Index - All Maturities (TR)

RBA Cash Rate 0.1% 0.4% 0.7% 1.5% 1.7% 1.9% 2.3% 1.7% 0.7% 01/09/15

Source: Fitzpatricks, Iress. Performance from 1 September 2015 to 30 June 2017. Performance is after investment management fees, excludes administration and advice fees and assumes re-investment of all distributions. Past performance is not a reliable indicator of future performance.

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MARKET COMMENTARY

Global equity markets delivered tapering of monetary stimulus, with the last 12 months, but with signals mixed results in June, although an immediate sell-off in the German that momentum may be slowing as collectively closed the 12 months bund market, which flowed over into valuations peak. ending 30 June 2017 on a very US Treasuries, Australian Government positive note. Bond markets fell as Bonds, and other major markets. The Australian equity market yields rose across the board, credit This speech followed on the back of remained broadly flat for June, markets were very firm, and the US hawkish comments from the Governor the S&P ASX 200 Accumulation dollar continued its recent slide, with of the Bank of Canada, as well as a Index posting 0.2% for the month the Australian dollar rising by over widely-anticipated 0.25% rate hike by and just above 14% over the last 3.0% against the US dollar over the the US Federal Reserve. 12 months. Australian small cap month. Volatility remained subdued, shares underperformed their larger although was slightly higher towards In equities, US markets showed signs counterparts, and the first six months month end. of slowing in June, with the S&P 500 of 2017 has seen a temperance to Total Return Index rising by less than the performance of Resources stocks The key focus for markets during 1%. This followed a very strong rally as the outlook on key commodities June was monetary policy, and in the index of approximately 18% continues to soften. The Reserve Bank the latter half of June saw a sharp over the last 12 months. Within the of Australia (RBA) left the official cash rise in major bond market yields. US market, Banks and Financials rate unchanged as the bank reiterated This was associated with a growing remained strong, with all but one its concerns on low wage growth, view that Central Banks are moving bank passing the Federal Reserve’s low core inflation and high levels of ahead with winding back monetary stress tests. The tech-heavy Nasdaq household debt as issues to consider stimulus, despite inconsistent signs fell in June (-0.9%), attributable over the long term. The rise in the of inflation and weak wage growth mostly to a reversal in the rally of Australian dollar against the US dollar across the globe. A key trigger for FANG stocks (Facebook, Amazon, in June has further complicated the the rise in yields was a speech given Netflix and Google), which saw some RBA’s policy considerations going by the President of the European sell-offs. Share prices in Apple and forward, given the depreciating Central Bank, Mario Draghi, where Microsoft also reversed, as investors Australian dollar (since 2013) has been he remarked that prudence needed rotated out of technology stocks. a primary factor which has assisted to be taken in any adjustment to the The S&P 500 Information Technology the domestic economy’s transition quantitative easing program. Markets sector has recorded an incredible run, following the mining investment interpreted this as a step towards the with the index up by over 30% over boom.

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PORTFOLIO TARGET ALLOCATIONS

Target Weights

Australian Equity Australian Equity International Liquid Enhanced AS AT 30 JUNE 2017 - Direct - Managed Funds Equity Alternatives Fixed Income

TOTAL 100.0% 100.0% 100.0% 100.0% 100.0% CASH 2.0% 2.0% 2.0% 2.0% 2.0% RATES AND CREDIT 0.0% 0.0% 0.0% 0.0% 98.0% Global Fixed Income 0.0% 0.0% 0.0% 0.0% 98.0% Atrium Enhanced Fixed Income Fund 0.0% 0.0% 0.0% 0.0% 98.0% EQUITIES 98.0% 98.0% 98.0% 0.0% 0.0% Australian Equities 98.0% 98.0% 0.0% 0.0% 0.0% Atrium Equity Opportunities Fund 0.0% 46.6% 0.0% 0.0% 0.0% SG Hiscock ICE Fund 0.0% 41.7% 0.0% 0.0% 0.0% Bennelong ex-20 Australian Equity Fund 0.0% 9.8% 0.0% 0.0% 0.0% International Equities 0.0% 0.0% 98.0% 0.0% 0.0% Magellan Global Equities Mandate 0.0% 0.0% 53.9% 0.0% 0.0% Northcape Capital Global Emerging Markets Fund 0.0% 0.0% 1.0% 0.0% 0.0% Antipodes Global Fund 0.0% 0.0% 43.1% 0.0% 0.0% LIQUID ALTERNATIVES AND PRIVATE MARKETS 0.0% 0.0% 0.0% 98.0% 0.0% Atrium Alternatives Fund 0.0% 0.0% 0.0% 98.0% 0.0% Alphadyne Segregated Portfolio* 0.0% 0.0% 0.0% 2.8% 0.0% Zebedee Segregated Portfolio* 0.0% 0.0% 0.0% 11.8% 0.0% Latigo Segregated Portfolio* 0.0% 0.0% 0.0% 4.9% 0.0% Transtrend Segregated Portfolio* 0.0% 0.0% 0.0% 1.2% 0.0% Winton Segregated Portfolio* 0.0% 0.0% 0.0% 3.4% 0.0% Bennelong Long Short Equity Mandate 0.0% 0.0% 0.0% 6.9% 0.0% P/E Global FX Alpha Fund 0.0% 0.0% 0.0% 4.9% 0.0% GMO Global Systematic Macro Fund 0.0% 0.0% 0.0% 9.8% 0.0% Regal Tasman Market Neutral Fund 0.0% 0.0% 0.0% 9.8% 0.0% Henderson Alphagen Long Short Agriculture Fund 0.0% 0.0% 0.0% 1.5% 0.0% Henderson Alphagen Relative Value Agriculture Fund 0.0% 0.0% 0.0% 1.5% 0.0% Albion Investment Trust 0.0% 0.0% 0.0% 0.6% 0.0% Barwon Childcare Property Fund 0.0% 0.0% 0.0% 1.1% 0.0% Woolloomooloo Investment Trust 0.0% 0.0% 0.0% 0.3% 0.0% Barwon Healthcare Property Fund 0.0% 0.0% 0.0% 0.1% 0.0% Primewest Exchange Tower Trust 0.0% 0.0% 0.0% 0.5% 0.0% Primewest Diversified Income Trust 0.0% 0.0% 0.0% 0.1% 0.0% APN Regional Property Fund 0.0% 0.0% 0.0% 0.9% 0.0% Marshall Investments Dickson Trust 0.0% 0.0% 0.0% 0.2% 0.0% Marshall Investments Bankstown Trust 2 0.0% 0.0% 0.0% 0.4% 0.0% Marshall Investments Caringbah Trust 0.0% 0.0% 0.0% 0.5% 0.0% Marshall Investments Greenwood Trust 0.0% 0.0% 0.0% 0.2% 0.0% Essential Appliance Rentals 0.0% 0.0% 0.0% 0.9% 0.0% Smarter Money Active Cash 0.0% 0.0% 0.0% 5.9% 0.0% Liquidity 0.0% 0.0% 0.0% 28.0% 0.0% Source: Atrium and External Investment Manager / Administrator websites or reports. Target weights as at 30 June 2017. Holdings within the Atrium Alternatives Fund are given on a look through basis, individual clients will not hold these funds directly. Investments denoted by * are in managed accounts accessed via the Crown Atrium Segregated Portfolio. The Magellan Global Equities Mandate is a separately managed portfolio managed by Magellan Asset Management Limited in a manner consistent with the Magellan Global Fund. The Bennelong Long Short Equity Mandate is a separately managed portfolio managed by Bennelong Long Short Equity Management Pty Ltd in a manner consistent with the Bennelong Long Short Equity Fund.

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SYDNEY BRISBANE Level 5, Challis House GPO Box 1193 37a Kennigo Street 4 Martin Place Sydney NSW 2001 Spring Hill QLD 4000 Sydney NSW 2000 PHONE 02 9248 8000 PHONE 07 3105 6500

EMAIL [email protected]

Important Information

The information in this document (Information) is provided by Fitzpatricks Private Wealth Pty Ltd (ABN 33 093 667 595, AFSL 247 429) (Fitzpatricks), and where relevant, its related bodies corporate. Unless otherwise stated, the Information is of a general nature only and does not take into account the objectives, financial situation or needs of any person. Before acting on the Information, investors should consider its appropriateness having regard to their own objectives, financial situation and needs and obtain professional advice. No liability is accepted for any loss or damage as a result of any reliance on the Information. Past performance is not a reliable indicator of future performance. Future performance and return of capital is not guaranteed.

Performance figures relate to the model portfolios offered by Fitzpatricks, with investment management implemented by underlying investment managers selected by Fitzpatricks. The details of each model portfolio may change and you should keep this fluidity in mind when considering figures. Actual performance will differ among clients depending on the timing of their investment, the ability of an investor to nominate stocks they do or do not wish to hold and the level of variation from the models. Figures are post portfolio management fees and expenses and assume reinvestment of distributions. They do not take into account inflation or tax or adviser fees.

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