An IOOF Multi Manager funds update for AWM planners

Presented by: Charles Kneale, Senior Relationship Manager Stephen Merlicek, Chief Officer IOOF MULTIMIX Stanley Yeo –Asset Allocation and /Implementation Date: 21 st February 2011 Disclaimer

This information was prepared by United Funds Management Limited ABN 65 073 186 419, AFSL 240973 (United Funds Management). United Funds Management is the Investment Manager of the United funds mentioned in this document. It is also part of the IOOF group consisting of IOOF Holdings Limited ABN 49 100 103 722 and its subsidiaries including Australian Executor Trustees Limited ABN 84 007 869 794, AFSL 240023, the Responsible Entity of the United funds mentioned in this document.

The information of a general nature only and is not intended to represent or be a substitute for specific financial or investment advice. It does not take into account any individual’s investment objectives, circumstances and needs for investment. Investors should consider consulting a financial adviser before making an investment decision.

To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. Neither United Funds Management nor any company in the IOOF group guarantees the performance of any fund or the return of an investor’s capital. The offer to invest in these funds is made in a copy of the current disclosure document for the relevant fund. Anyone wishing to invest in the funds mentioned in this document will need to complete the application form in the current disclosure document for the relevant fund.

Past performance is not indicative of future performance.

Lonsec disclaimer

The Lonsec Limited (“Lonsec”) ABN 56 061 751 102 rating (assigned December 2011) presented in this document is limited to “General Advice” and based solely on consideration of the investment merits of the financial product(s). It is not a recommendation to purchase, sell or hold the relevant product(s), and you should seek independent financial advice before investing in this product(s). The rating is subject to change without notice and Lonsec assumes no obligation to update this document following publication. Lonsec receives a fee from the fund manager for rating the product(s) using comprehensive and objective criteria.

Part of the IOOF group Agenda • Introduction • Corporate overview • Funds management structure

• United’s investment funds • Philosophy and enhancements to the investment process • United’s multi-manager funds • Single-sector multi-manager funds (Australian equities, international equities, property)

• Benefits for clients of investing with IOOF • Appendices

Part of the IOOF group The past twelve months

• Appointment of new CIO – Stephen Merlicek (October 09) • Consolidation of MultiMix and United investment teams (Dec 09) • Merging of United and MultiMix Investment Committees (Dec 09) • Appointment of asset consultant – Russell Investments (Jan 10) • Adoption of sector specialists approach ( Jan 10) • Recruitment of portfolio managers • Dan Farmer – Australian Equities (Feb 10 ) • David Kilmer –International Equities (July 10) • Stanley Yeo - Asset Allocation/implementation (Aug 10)

Part of the IOOF group 4 The past twelve months

• Merging of United and MultiMix wholesale funds/ new Manager line-up (May –Sept 10) • Rationalised to one custodian – BNP (Aug 10) • Outsourcing of admin functions – Ongoing • Lonsec review and ratings upgrade (Nov 10) • Bridges research review (Nov 10) • Chant West ratings review (in progress) • Russell SAA review (Jan 11)

Part of the IOOF group 5 Our investment philosophy

• To maximise returns for a given level of risk • To take a fully diversified approach through multiple sources of beta. • To identify and select ‘best of breed’, high quality investment managers • To have multiple sources of ‘value add’: • asset allocation • currency • manager selection • To maintain a high level of transparency and liquidity • To minimise investment costs

Part of the IOOF group Enhancements to the way we manage clients’ money

• Use of an external asset consultant – Russell Investments • Research • Strategic tilting service • Strategic Asset Allocation Review

• Greater sources of value add/alpha • Manager selection • Asset allocation • Currency

Part of the IOOF group Enhancements to the way we manage clients’ money

• Increased economies of scale = more manager specialisation • Small Cap manager appointment • Buy Write manager

• More dynamic asset allocation • Added source of value add • Greater internal risk control

• Greater innovation • Potential to research and invest in ‘new’ sub-asset classes such as emerging markets

Part of the IOOF group Diversified funds

Investment consultant: Russell Investments

Strategic asset allocation Strategic tilting

Stage 1: Decide broad asset class exposures • Occasional deviations from SAA (core assets only) • Only when markets are at extremes • With a view to capturing mean reversion Stage 2: Consider performance enhancing Stage 1: Asset class at an unsustainable exposures (sub-sectors, illiquid assets, listed extreme and unlisted assets) Stage 2: Conditions in place for a return to normal

Australian International Australian International Fixed Cash Alternatives equities equities property property interest

Part of the IOOF group 9 Strategic tilting in practice Currency/overseas assets

• A$ at a 30 year high to the USD. Also extreme against Sterling and Euro. • RBA/Fed interest rate differential at extreme. • Cautious on commodity prices. • Asset allocation committee decided to put more money offshore (AEQ to OEQ) for the UFM Capital Growth, Diversified Aggressive and High Growth funds (Nov 10). • Involved advice from Russell – IOOF asset consultants. • Valuation on overseas shares was attractive – especially in the US. • The natural hedge – if markets fall A$ fall – GFC example. • Competitors follow suit with this strategic tilt. • Tilt has outperformed by 1.4% as at 14 February 2011.

Part of the IOOF group 10 Strategic tilting in practice Fixed Interest / Cash

• In August 2010, 20% allocated to cash funded from global bonds within the Diversified Fixed Interest Fund. • At the time, US 10-year bond yields reached 2.5%. Low of 2.4% in October 2010. • From its low, the US 10-year Treasury yield increased to 3.3% by the end of January. • Since tilt implemented, global bonds significantly underperformed cash. • Tilt has contributed over 1% to added value to the Diversified Fixed Interest Fund. • Capital losses avoided from rising yields as a result of cash allocation.

Part of the IOOF group 11 Underlying United Sector Funds

Part of the IOOF group United funds available on the bridges/ wealth managers and aligned planners APL

Net MER Investment Strategies United Fund APIR Code (%(I) DPR(ii) RIS(iii) ML (iv) SAP+IAP(v) Growth Funds United Sector Leaders Capital High Growth Fund AUX0008AU 0.96* * * * * Growth Funds United Sector Leaders Capital Growth Fund SMF0102AU 1.00* * * * * Balanced Funds United Sector Leaders Capital Balanced Fund UFM0051AU 1.12* * * * * Capital Stable Funds United Sector Leaders Capital Stable Fund SMF0103AU 0.79* * * * * Australian Share Funds United Sector Leaders Australian Equities Fund SMF0101AU 0.77* * * * * International Share Funds United Sector Leaders International Equities Fund SMF0106AU 1.28* * * * * Property Funds United Sector Leaders Australian Property Fund SMF0107AU 0.92* * * * * High Yielding Funds United Income Fund PIM0003AU 0.70* * * * * Fixed Interest Funds United Sector Leaders Fixed Interest Fund SMF0105AU 0.71* * * * * Cash Funds United Cash Management Fund (Class B) UFM0060AU 0.33* * * * *

(i) Management Expense Ratio as at 30 June 2010. (ii) Dividend Reinvestment Plan. This is only applicable to investments in the Superannuation Plan and the Personal Investment Plan. (iii) Regular Investment Sweep. This is only available in the Superannuation Plan, the Super Essentials Plan and the Investment Accumulation Plan. (iv) Margin Lending. This only applies to investment sin the Personal Investment Plan.. * A applies.

Part of the IOOF group United Sector Leaders Australian Equities Fund

Previous structure Dec 2010 Integrity 26.9% Integrity Bernstein Value 16.86% 17.14%

Solaris 26.6% Solaris 19.13% Perennial 17.39% Alleron 27.5% Cash 1.05%

Legg Mason Blackrock 5.68% Fundamental SGH20 Merlon 14.95% 18.9% 7.81%

Returns for periods ending 31 December 2010 3 Months 6 Months 1 Year 3 Years 5 Years p.a p.a United Sector Leaders Australian Equities Fund 4.6% 12.9% 0.3% -7.8% 2.9%

Chant West Median 4.4% 12.9% 0.7% -3.6% 5.3%

Excess Return 0.2% 0.0% -0.4% -4.2% -2.4%

Source: IOOF/ Chant West Returns are before management costs and tax. Past performance is not an indication of future performance.

Part of the IOOF group United Sector Leaders International Equities Fund

Previous Structure Dec 2010

LSV Asset Managemen t Pareto Cash 25.2% Wellington 9.86% 1.30% 0.01% Axiom 16.65%

Axiom 25.3%

Perpetual LSV Asset 24.8% Management 17.73%

State Street Perennial Boston Global 4.17% 24.8 % Advisers 50.28%

Returns for periods ending 31 December 2010 3 Months 6 Months 1 Year 3 Years 5 Years p.a p.a United Sector Leaders International Equities Fund 3.4% 3.0% -1.2% -12.7% -5.6%

Chant West Median 3.1% 3.0% -0.8% -10.2% -4.3%

Excess Return 0.3% 0.0% -0.4% -2.5% -1.3% Source: IOOF/Chant West. Returns are before management costs and tax. Past performance is not an indication of future performance .

Part of the IOOF group United Sector Leaders Australian Property Fund

Dec 2010

Challenger) 79.89%

CFS 18.51%

Cash 1.60%

Returns for periods ending 31 December 2010 3 Months 6 Months 1 Year 3 Years 5 Years p.a p.a United Sector Leaders Australian Property Fund 0.5% 4.5% -0.3% -20.4% -9.7%- Chant West Median -1.0% 2.7% 0.0% -20.3% 9.0% Excess Return 1.5% 1.8% -0.3% -0.1% -18.7%

Source: IOOF/Chant West Returns are before management costs and tax. Past performance is not an indication of future performance.

Part of the IOOF group United Sector Leaders Fixed Interest Fund – Diversified

Previous structure Dec 2010 PIMCO Aust Bond 10.0% PIMCO Int Bond PIMCO GC Pimco -ABF 25.4% 0.95% 7.94%

United High Newton Pimco GBF Yield 25.4% 20.11% 25.85%

Perennial 4.08%

Perennial - Fixed Interest Loomis United PIMCO TR Sayles 28.7% High Yield 20.11% 8.22%

Returns for periods ending 31 December 2010 3 Months 6 Months 1 Year 3 Years 5 Years p.a p.a United Sector Leaders Fixed Interest Fund 0.5% 3.7% 10.6% 9.1% 7.2% Chant West Median 0.5% 3.3% 9.2% 8.5% 7.1%

Excess Return 0.0% 0.4% 1.4% 0.6% 0.1%

Source: IOOF/Chant West Returns are before management costs and tax. Past performance is not an indication of future performance .

Part of the IOOF group United Income Fund

December 2010

Perennial 100.0%

Returns for periods ending 31 December 2010 1 Month 3 Months 1 Year 3 Years 5 Years p.a p.a United Sector Leaders Income Fund 0.91% 2.82% 9.64% 4.99% 6.22%

UBSA Bank bill Accum Index 0.42% 1.24% 4.66% 5.23% 5.69%

Excess Return 0.49% 1.58% 4.98% -0.24% 0.53%

Source IOOF Returns are before management costs and tax. Past performance is not an indication of future performance.

Part of the IOOF group Cash Management Trust

• FUM: $1.58b • Weighted average duration: 66 days • Term deposits: 55% • Maximum exposure: CBA 30% • A1+ exposure: 88% • A1 exposure: 5% • A2 exposure: 7%

Periods to 31 Jan 2011 1 mth 3 mths 1 yr 3 yrs 5 yrs (%) (%) (% p.a.) (% p.a.) (% p.a.) United Cash Management Fund 0.46 1.37 5.00 5.30 5.76 UBSA Bank Bill Index 0.42 1.24 4.66 5.23 5.69 Excess 0.04 0.13 0.34 0.07 0.07

Gross of fees

Part of the IOOF group Bridges Review 19 United’s Diversified Funds

Part of the IOOF group United Capital Stable Fund

Sept 2010 Dec 2010

Alternatives 4.7% Alternatives 4.9% Fixed Interest Property 41.5% 5.9% Fixed Interest 41.7% International International Property equities equities 6.0% 8.7% 9.0% Cash Cash Australian equities 25.5% Australian equities 13.7% 24.0% 14.3%

Returns for periods ending 31 December 2010 3 Months 6 Months 1 Year 3 Years 5 Years p.a p.a United Sector Leaders Capital Stable Fund 1.9% 5.7% 6.9% 2.3% 4.6% Chant West Median 1.8% 5.4% 6.4% 2.9% 5.0% Excess Return 0.1% 0.3% 0.5% -0.6% -0.4% Source :IOOF and Chant West Returns are expressed gross of all fees and tax. Past performance is not an indication of future performance.

Part of the IOOF group United Capital Growth Fund

Sept 2010 Dec 2010

International equities Fixed Interest International 26.3% 20.2% equities 28.6% Fixed Interest 17.7%

Australian equities Alternatives Australian equities 27.5% 30.7% 10.0% Alternatives Property 9.2% Property 10.5% 9.6%

Cash Cash 5.5% 4.2%

Returns for periods ending 31 December 2010 3 Months 6 Months 1 Year 3 Years 5 Years p.a p.a United Sector Leaders Capital Growth Fund 3.1% 8.1% 4.0% -4.5% 1.7% Chant West median 3.4% 8.7% 5.7% -1.9% 3.4% Excess Return -0.3% -0.6% -1.7% -2.6% -1.7% Source IOOF/ Chant West Returns are expressed gross of all fees and tax. Past performance is not an indication of future performance.

Part of the IOOF group United Capital Balanced Fund

Sept 2010 Dec 2010

Fixed Interest International 29.7% International Fixed Interest equities equities 29.6% 17.1% 17.3%

Alternatives Australian equities 5.9% Australian equities Alternatives 26.1% Cash 26.8% 6.0% 14.4% Cash 13.6%

Property 6.8% Property 6.8%

Returns for periods ending 31 December 2010 3 Months 6 Months 1 Year 3 Years 5 Years p.a p.a United Sector Leaders Capital Balanced Fund 2.7% 7.0% 5.3% --1.3% 3.1% Chant West Median 2.5% 7.0% 6.0% 0.7% 4.1% Excess Return 0.2% 0.0% -0.7% -2.0% -1.0% Source: IOOF/ Chant West Returns are expressed gross of all fees and tax. Past performance is not an indication of future performance.

Part of the IOOF group The slow motion recovery

US double dip now increasingly unlikely: • U.S growth picking up – 3.5% plus for 2011 • Quantitative easing continuing – $75 billion a month • Global equity market valuations are ok – US equity market has doubled since GFC lows but has potential to rally further • Lots of money still on the sidelines which could help underpin the rally • Earnings Per Share (EPS) growth will be lower than in 2010, but still respectable

24 Part of the IOOF group The slow motion recovery

Bonds are still expensive especially US bonds • Rates have backed up recently but could increase further • Inflation increasingly thought of as a potential issue

Australian dollar at extreme valuation • Since the dollar was floated in 1983, it has only reached parity with the U.S dollar once

China story and high relative interest rates underpin the $A but it is susceptible to shocks

25 Part of the IOOF group What is our competitive advantage?

• A true performance culture • Proactive, innovative approach delivering multiple sources of value add • Team of investment professionals with proven track record • Accountable/ focused/ alignment of interests • Risk management culture • New emphasis on asset allocation • Investment professionals that can manage money not just a manager of managers

Part of the IOOF group 26 Benefits of investing with United • Adviser • Efficient for client accounts – less paperwork. • Predictable investment returns through diversification – no unwanted surprises! • Concise monthly investment reporting and fund profiles.

• Client • Access the ‘best’ managers from around the world. • Diversification across asset classes, within asset classes and across investment management styles • Seamless changes and automatic rebalancing • Peace of mind and security

Part of the IOOF group The IOOF investment team

Title Name Yrs Background exp

CIO Steve Merlicek 22 Steve joined IOOF in the newly created role of CIO in October ’09 with B.Ec (Hons), responsibility for IOOF’s Funds Management Division, comprising of IOOF’s M.Com (Hons), multi-manager funds, MultiMix and United. Steve was formerly CIO at Telstra F.Fin Super and has over 12 years specific portfolio management experience. PM Dan Farmer 15 Dan joined the investment team from Telstra Super where he was in charge of Australian Equities B.Ec (Hons). the Australian Equity portfolio. Dan has experience in managing both direct M.Com (Hons) portfolios and external managers. PM David Kilmer 13 David recently joined the investment team from the IOOF Research team where International F.Fin, CPA he was Head of Research. David has experience in managing both manager Equities research and model portfolios for platforms and dealer groups.

PM Simon Gross 12 Simon was part of the IOOF’s MultiMix investment team, he continues his focus Property Registered on researching and managing the indirect and direct property portfolios. He has valuer a number of years experience in the direct property sector. PM Hugo Agudo 10 Hugo was also part of the IOOF MultiMix team and remains responsible for Alternatives B.Sc research and analysis for the alternatives portfolio. He also has experience in portfolio construction, manager research and alternatives. PM Stanley Yeo 11 Stan was employed as a Senior Consultant for Russell Investments for 9 years. Asset Allocation/ B.Com, LLB He advised various large superannuation funds such as BHP, Funds SA, Implementation (Hons), CFA Pension Fund of Thailand in areas such as strategic asset allocation, constructing multi-manager portfolios and researching managers. Previous to this role, he was an analyst with Gartmore Investment Management in London.

Senior Relationship Charles Kneale 23 Charles' experience includes Institutional business development roles with Manager (DipFP, SAFin) renowned companies such as Citicorp Global Asset Management (Citibank Ltd) and Dow Jones. Charles' present role - Senior Relationship Manager involves working with corporate super policy committees, financial advisers and research consultants.

Part of the IOOF group