Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged)

This report has been prepared for financial advisers only

Superior INTRODUCTION INTRODUCTION

Key Principles Star Rating* The underlying principles of the assessment process are to: Investment products are awarded a star rating out of a possible five stars -- identify the long term commercial potential of the Responsible and placed on the following websites: www.sqmresearch.com.au Entity/Investment Manager; Licensed Investment Adviser -- evaluate management’s capabilities, previous performance in the SQM Research is licensed as an Australian Financial Services Licensee, specific industry and the stability of the organisation; Licence No. 421913, pursuant to section 913B of the Corporations Act -- evaluate identified markets (domestic and international existence, 2001. The licence authorises SQM Research to carry on a financial services stability and growth potential); business to provide general financial product advice only. -- benchmark key performance assumptions and variables against Privacy Policy industry peers; SQM Research collects only a limited amount of personal information -- weigh up the relevant risks of the Responsible Entity/Investment from its clients. Our privacy policy can be viewed at www.sqmresearch. Manager; com.au. This will enable you to understand your rights, our obligations -- assess structure and ownership; and what SQM Research does with any information it collects about you. -- determine if the Responsible Entity/Investment Manager is structured in such a way as to protect investor’s interests; and Fees charged for Report SQM Research has received a fee from the fund manager for this report -- allow an opinion to be formed regarding the investment quality of and rating. the Responsible Entity/Investment Manager. General Financial Product Advice Assessment This advice will not take into account your, or your clients, objectives, SQM Research conducts a detailed site inspection of the projects/properties financial situation or needs and will not be provided in respect of any within the Responsible Entity’s/Investment Manager’s managed funds. other financial products. Accordingly, it is up to you and your clients -- The site assessment considers the following areas: to consider whether specific financial products are suitable for your -- sustainability of the site for the purpose intended; objectives, financial situations or needs. -- management skills, qualifications, capabilities and experience; and Report Date: 27 March 2019 -- associated property risks and their management.

Star Rating Description Definition Investment Grading

4½ stars and Outstanding Highly suitable for inclusion on APLs High Investment above The fund most often outperforms its peers and benchmark. In all cases the fund is operating to its mandate grade rating and product disclosure statement (PDS). There are no corporate governance issues. Management is extremely experienced and skilled and has access to significant resources.

4 stars to 4¼ Superior Suitable for inclusion on most APLs High Investment stars The fund outperforms (or is likely to) its peers and benchmark the majority of the time. The fund most of grade rating the time has been operating within its mandate and PDS. There are very little to no corporate governance concerns. Management is of a very high calibre.

3¾ stars Favourable Consider for APL inclusion Approved The fund may outperform its peers and benchmark the majority of the time or SQM believes this is a fund that has potential to be an outperforming fund over the medium term. Management is of a quality calibre but may not yet be fully tested. There are no corporate governance concerns or they are of a minor nature. 3½ stars Acceptable Consider for APL inclusion, subject to advice restrictions Low investment There is some degree of additional risk attached to the fund by way of performance. The fund may grade rating periodically underperform its peers and benchmark or it has not been fully tested. There may be some additional concentration risk. Management is generally experienced and capable. There might be corporate governance issues of a mid-level or concerns over the Responsible Entities/Parent Entities financial position/ performance. 3¼ stars Caution required Not suitable for most APLs Unapproved Performance has been significantly under-benchmark and peers. There is a greater than average risk of underperformance over the medium term. There is a risk of the fund not operating to mandate or to its PDS. There could be corporate governance concerns. Management has been operating in an average manner. 3 stars Strong Caution Not suitable for most APLs Unapproved Required The fund is unlikely to perform to its mandate over the near term. There might be some greater than average corporate governance concerns. SQM has a number of concerns of management. Below 3 stars Avoid or redeem Not suitable for most APL inclusion Unapproved

Hold – The rating is currently suspended until SQM Research receives further information. A rating is typically put on hold for a period of two days to four weeks. Withdrawn – The rating is no longer applicable. Significant issues have arisen since the last report was issued, and investors should avoid or redeem units in the fund. Not rated – The fund has not been rated by SQM. CONTENTS 3

Summary 2 Fund Summary 3 SQM Research’s Review and Key Observations 3 Strengths of the Fund 5 Weaknesses of the Fund 6 Other Considerations 6 Key Changes Since the Last Review 6 Investment Process & Portfolio Construction 7 Investment Process Diagram 7 Process Description 7 Corporate Governance/Business Strategy 11 Key Counterparties 11 Parent Company 11 Investment Manager / Fund Manager 11 Responsible Entity 11 Management Risk 12 Funds Under Management (FUM) 12 Management & People 13 Investment Team 14 Staffing Changes 15 Key Investment Staff 15 Remuneration and Incentives 16 Product Features - Fees & Redemption Policy 17 Buy/Sell Spread 17 Ongoing Fees 17 Performance Fees 17 Overall Fees 17 Quantitative Analysis 18 Quantitative Insight 18 Returns and Risk 22 Asset Allocation & Risk Parameters 24 Recent Positioning 25

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) SUMMARY 2

SQM Rating Superior. Suitable for inclusion on most APLs.

Fund Details APIR: ETL6318AU Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) APIR: ETL7610AU Robeco Global DM Multi-Factor Equities Alpha Fund (AUD) Manager Robeco Hong Kong Limited Responsible Entity Equity Trustees Limited Custodian JP Morgan Australia Investment Details Fund Inception 08-May-18 ETL6318AU (Hedged) - $12.7 mill as at Oct-2018 Fund Size ETL7610AU (Unhedged) - $6.3 mill as at Oct-2018 Fund Type Equities Deliver higher risk-adjusted returns than the MSCI World Index, net dividends Return Objective (PDS) reinvested, in AUD Hedged over a full business cycle Internal Return Objective See above Risk Level (PDS) High Internal Risk Objective See above Benchmark MSCI World Index (AUD Hedged) No. of stocks/positions 329 as at July 31, 2018 Gearing (Fund) N/A Fund Specifications Minimum Application $10,000 Redemption Policy Daily Distribution Frequency Semi-annual ICR 0.65% MER 0.65% Performance Fee None Buy/Sell Spread 0.13% / 0.10% Currency Hedging Hedged to AUD Fund Time Horizon Approximately five to seven years Other Turnover Expected annual turnover of 50% Top 10 Holdings Weight 7.32%

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) SUMMARY 3

Fund Summary Fund Rating

NOTE: The Fund has two variants – hedged and unhedged. The two Fund variants have achieved the following ratings: This report refers to the hedged variant by name, but applies also to the unhedged version APIR code: ETL6318AU Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Description Hedged) Star Investment Description Definition The Robeco Global DM Multi-Factor Equities Alpha Fund - Rating Grading AUD Hedged, (the Fund) is an open-ended unlisted registered 4.00 Suitable for inclusion High Investment Superior managed investment scheme that is primarily invested in stars on most APLs Grade Rating equities of companies that only operate in mature economies (developed markets) around the world. The fund employs a fully APIR code: ETL7610AU quantitative equity strategy that focuses on exploiting three key Robeco Global DM Multi-Factor Equities Alpha Fund (AUD) Star Investment factors: value, momentum and quality, using enhanced factor Description Definition definitions to avoid unrewarded risk and unwanted factor tilts. Rating Grading 4.00 Suitable for inclusion High Investment This strategy is managed according to a disciplined investment Superior stars on most APLs Grade Rating process which combines the stock ranking from a stock selection model with a proprietary portfolio construction algorithm and a SQM Research’s Review and Key Observations set of risk controls. The fund’s portfolio aims to achieve higher risk-adjusted returns than both the broad market and generic 1. People and Resources factor indices over a full business cycle. Size and Resources of the Fund Management Company The Australian domiciled Fund has a very short history. To provide a broader perspective for analysis, SQM Research Robeco has A$264.1 billion in Assets under Management (June has also noted the returns of a simulation of three-factor 2018) and has invested in emerging markets since 1930. The funds which make up the MFEA unit trust (Simulation). firm has developed high yield investment strategies since 1998 This return data is reported as translated into AUD, and USD 161 billion is managed in ESG-integrated assets (June therefore unhedged. The peer group is comprised of 2018). unhedged global equity funds, and the benchmark is MSCI ACWI NR AUD. This analysis is found in the Quantitative A total of A$92 billion is managed based on Quant models (June Analysis section of the report. 2018). Robeco employs 890 people at 15 offices worldwide.

About the Manager Investment Team

The day to day investment management of the fund is handled Robeco’s Multi-Factor strategies and the single factor strategies: by a related corporate body of Robeco Hong Kong Limited: Value, Momentum and Quality, are managed by an experienced Robeco Institutional Asset Management B.V. (Robeco). Robeco team of investment professionals within an organisation which is a global asset manager, headquartered in Rotterdam, the is fully committed to quantitative investing. The head of the Netherlands. Robeco offers a mix of investment solutions within Factor Investing Equities team and portfolio manager is Joop a broad range of strategies to institutional and private investors Huij, while Simon Lansdorp, Rob van Bommel and Daniel Haesen worldwide. As at June 2018, Robeco had A$264.1 billion in are also portfolio managers of factor investing strategies. assets under management. Founded in the Netherlands in The portfolio managers adopt a team approach, where all 1929, Robeco is a subsidiary of RGNV (Robeco Groep N.V.) with the investment professionals work together to implement A$296 billion in assets under management, 51% of which are the model’s ranking in the portfolio, and to monitor positions institutional. ORIX Corporation fully owns RGNV. and risk exposure. In managing the factor investing strategies, In 2016, RGNV separated its activities into a financial holding the portfolio managers benefit from the expertise of the company and six independent asset managers: Robeco, Boston Robeco quantitative researchers. They are responsible for the Partners, Harbor Capital Advisors, Transtrend, RobecoSAM and development and enhancement of quantitative models and CanaraRobeco. This structure created a clear distinction between applications, which form the heart of the quantitative equities the activities of the holding company and its subsidiaries. In the product line. The quant group consists of more than 40 same year, ORIX became 100% owner of RGNV by acquiring quantitative researchers and portfolio managers, of which 15 the 9.99% holding in RGNV from Rabobank. focus on quant equities portfolio management.

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) SUMMARY 4

2. Investment Process and Philosophy 1. Internal Audit provides assurance on the effectiveness of governance, risk management and internal control. Investable Universe 3. Portfolio Characteristics The investment universe is based on the S&P Broad Market Index and MSCI indices. It excludes dual listings and stocks Portfolio Turnover with data issues and involves a liquidity screening based on a Typically, the annual turnover of the strategy is expected to minimum average trading volume of EUR 2 mln and a minimum be around 50%. The fund takes a rules-based investment market cap of EUR 500 mln. This results in a total investable approach, resulting in more stable portfolio weights and hence universe of 4,000 stocks for Global DM Multi-Factor Equities. lower turnover. In the long run, this feature further enhances Process / Philosophy / Style returns.

The Funds investment philosophy is based on the conviction that Liquidity financial markets are not fully efficient and that they have the Liquidity risk is mitigated by applying a liquidity screen in the expertise and resources to identify and exploit certain aspects determination of the investable universe and by comparing of the market for the benefit of their clients. The fund uses the positioning of portfolios to trading volumes and market an active management strategy to take advantage of selected capitalisation. It is assumed that 20% of the average daily factor premiums and apply a disciplined investment process trading volume can be liquidated daily without significant which leads to long-term risk-adjusted outperformance. market impact. Robeco’s quantitative investment strategies are based on the Leverage following beliefs: • Evidence-based research: Robeco uses extensive This Fund employs neither actual leverage (through borrowing empirical testing over longer periods and in different by the Fund) or economic leverage (through the use of markets to research ideas that come from academic derivatives). literature, internal discussions or client meetings. 4. Performance & Risk • Economic Rationale: Robeco enhances generic quantitative factors to aim to understand the economic Return Objective & Performance drivers behind factor premiums thoroughly. The return objective stated in the PDS is that the Fund aims • Prudent Investing: Robeco has developed a proprietary to “deliver higher risk-adjusted returns than the MSCI World portfolio-construction algorithm to help them understand the reasons for each portfolio position and transaction. Index, net dividends reinvested, in AUD Hedged over a full Environmental, social and governance (ESG) factors are business cycle”. integrated into the investment strategy as investors and The Fund’s formal benchmark is the MSCI World TR Index (AUD society are increasingly beginning to consider these factors. Hedged). Risk Management Fund Excess Returns %: Half-yearly (net of fees) The risk management function relies on three independent sources of oversight: 0.0 1. Portfolio Managers and line management own and manage risks. They are responsible for maintaining -0.5 -0.35 effective internal controls and for executing risk and control procedures on a day-to-day basis. -1.0 1. Risk Management and Compliance Departments. -1.5 Both functions support line management by building and monitoring controls. They focus on significant risks, i.e. Returns Excess risks that impede achieving business objectives, including -2.0 those agreed with clients. Both Risk Management -2.5 -2.32 and Compliance have reporting lines to the Executive Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 Feb 19 Committee that are independent of the Investments latest data = 2 months ending Feb-19 function.

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) SUMMARY 5

Length of Track Record Performance Fee:

The Robeco Global Developed Market Multi-Factor Equities The Fund does not charge a performance fee. Alpha Fund has a relatively short history of eight months. Such Governance that any observations and analysis of returns will have very little statistical meaning. SQM Research notes that returns, volatility The Board of Directors of the Responsible Entity, Equity Trustees and other risk measures can be “noisy” and less reliable when (EQT) consists of six independent directors (including the quantified using a small sample size of observations. Please Chairman) from a total of seven members. SQM Research note that longer-term analysis of simulation results can prefers the inclusion of independent members on the Board be found in the Quantitative Analysis section. of Directors – it is a meaningful way to enhance governance oversight. EQT’s Compliance Committee Charter requires that Risk Objective the Committee shall comprise at least three members all of The Fund’s PDS states that the risk level of the Fund is considered whom (including the Chairman) are independent non- to be “High”. executive directors of EQT, with a quorum of two members required to attend a meeting. SQM Research views independence The Fund’s volatility (standard deviation of monthly returns) in a RE oversight body such as the Compliance Committee as a since inception to Feb-2019 was 17.40% compared to a peer strong and favourable factor in Fund governance. average of 15.96% and 16.82% for the benchmark. FUM (Funds under Management) / Capacity Drawdown Experience The Fund currently has FUM of $12.7 million (October 2018). Drawdown Size (peak-to-trough) Growth of $10,000 Fund Bench Peers Average -14.44% -13.43% -11.74% Benchmark Fund Peer Average Number 1 1 1 $11,000

The single drawdown experienced to date has been worse than $10,500 benchmark and peers.

$10,000 Correlation to Australian Equities

$9,500 The Fund’s correlation with the ASX300 since its inception to

Feb-2019 is 66.74%. $9,000

5. Other Features $8,500

Fees Jul 18 Jan 19 Jun 18 Jun Oct 18 Feb 19 Sep 18 Dec 18 Nov 18 Aug 18 May 18

Fees and Costs Fund Peer Avg Difference Strengths of the Fund Management Fee (% p.a) 0.65% 1.08% -0.43% Expense Recovery (% p.a) Nil - - • An extensive accumulation of experience and knowledge Performance Fee (%) Nil 10.00% - regarding quantitative factor investing as applied to the real world, backed by advanced academic research. Buy Spread (%) 0.13% 0.18% -0.05% Sell Spread (%) 0.10% 0.18% -0.08% • A deep and highly qualified team of portfolio managers and quantitative researchers. Management Fee • A wealth of global resources applied to the process, given • Expressed as a percentage rate per annum of the Fund’s the firm’s reach in terms of staff and IT infrastructure. Net Asset Value (“NAV”) • Strong risk management processes and explicit inclusion of • Calculated daily and paid monthly ESG factors in stock selection.

• Including GST and impact of RITC (Reduced Input Tax • A very competitive fee structure. Credit) • Low key-person risk.

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) SUMMARY 6

Weaknesses of the Fund

• The short history of the local Fund.

Other Considerations

• Risk reporting and performance measurement tools are sophisticated and detailed.

• Ongoing commitment to extensive research and development to monitor, maintain and enhance the quantitative algorithms underlying the process.

Key Changes Since the Last Review

• This report is an inaugural review.

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) INVESTMENT PROCESS & PORTFOLIO CONSTRUCTION 7

Investment Process Diagram

Monthly rebalancing process to obtain highest possible model exposure 1) Stock ranking > Proprietary quantitative stock selection model > Qualitative review on stock rankings 2) Portfolio optimization > Robeco portfolio construction algorithm > Determine most efficient instruments > Check proposed trades 3) Execution and Monitoring > Order execution by global trading desks > Continuous monitoring of portfolio > Portfolio rebalancing aligned with cash flows

Process Description

Universe

Investable Universe The investment universe is based on the S&P Broad Market Index and MSCI indices. It excludes dual listings and stocks with data issues and involves a liquidity screening based on a minimum average trading volume of EUR 2 mln and a minimum market cap of EUR 500 mln. This results in a total investable universe of 4,000 stocks for Global DM Multi-Factor Equities.

Investment Process

Top-down or The investment approach is a pure bottom-up quantitative approach. bottom-up

Research and Stock Selection Portfolio Construction Investment ideas from the investable universe are generated by the stock-ranking model for each factor. Process The model has been developed jointly by quantitative researchers and portfolio managers. The investment team first focuses on reducing risk by using a combination of Value, Momentum and Quality Factors to produce a portfolio that offers efficient exposure to multiple factor premiums and minimises turnover. Within each factor, members of the Robeco team ensure that the securities they select do not harm the other factors. Thus, when selecting a security within the value factor, momentum and quality must be kept in mind. This method of avoiding negative or opposing factor exposure results in efficient and balanced exposure to these three factors.

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) INVESTMENT PROCESS & PORTFOLIO CONSTRUCTION 8

Research and The default allocation to each factor is one-third of the portfolio. Portfolio Construction Portfolio Construction Process The portfolio-construction process is disciplined and transparent with continuous monitoring and control ...continued by the portfolio managers. It is based entirely on the ranking generated by the quantitative stock-ranking model. The aim is to preserve the model’s unique risk-return characteristics as much as possible while limiting turnover and constraining risk. The first phase of the portfolio construction process starts with a new quantitative stock ranking. The new ranking is subject to plausibility checks, both by Investment Research and the Portfolio Management team, in particular with stocks that exhibit a large ranking change. The current portfolio and investment universe are checked for stocks that are strongly driven by any factor other than the model themes. Examples include stocks for which a takeover bid has been announced or a situation of major litigation or regulatory risk. These stocks are excluded from the investment universe. A proprietary portfolio construction algorithm then uses rankings from the stock selection model to create an “optimal” portfolio. The algorithm’s objective is to skew the portfolio to the highest ranked stocks with low expected risk and attractive upside potential. In the case of cash inflows, the Fund buys top-ranked stocks rather than investing proportionally over existing stocks in the portfolio. Wherever there are cash outflows, the Fund sells bottom-ranked stocks. This process means that cash flows are used efficiently to obtain better exposure to the quantitative ranking, which leads to lower turnover and can improve performance. ESG factors are integrated into the portfolio construction by ensuring that the weighted sustainability score of the portfolio is at least as high as the index. If the portfolio generated by the stock selection model scores below average on sustainability, the portfolio construction tool will include stocks that improve the sustainability profile. Companies with a higher sustainability score have a higher chance of ending up in the portfolio. This provides a positive ESG screen for stocks. The region, country, sector, industry group and single stock weights are all subject to strict concentration limits to ensure sufficient diversification. The tool ensures that at rebalancing date, portfolio weights are within these ex-ante concentration limits. At the same time, portfolio turnover is controlled by selling stocks that fall to the bottom 40% of the ranking. In the long run, this leads to lower transaction costs and higher return potential.

Sell Discipline The portfolio manager buys stocks ranked highly in the model’s quantitative ranking – in principle those in the top quintile. The initial target weight of a stock is its weight in the reference MSCI World Index plus 60 basis points. The maximum single stock weight is 2%. Each position is held until the stock drops to the bottom 40% of the quantitative ranking. The proceeds of these sells are subsequently used to buy top-ranked stocks.

Risk Management The overall risk-management framework is supported by three teams: Firstly, the entire investment process, including the model and the investment constraints, are monitored daily by the investment team. Each team member is assigned coverage of specific areas, including: • Position monitoring (daily) • Corporate actions (daily) • FX exposure (daily) • The plausibility of large position changes (weekly) • Checks on data quality (weekly) • Feasibility of proposed trades (before trading) Secondly, the Risk Management department performs an independent monitoring function, overseeing market and liquidity risks and applying stress tests.

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) INVESTMENT PROCESS & PORTFOLIO CONSTRUCTION 9

Risk Management Thirdly, the Compliance department is responsible for monitoring client restrictions and guidelines and ...continued for overseeing the market exposure and concentration limits. Concentration limit Concentration and position limits have been specified to enforce a measure of diversification while preventing excessive constraints. This ensures that concentrations in regions, countries, sectors and industry groups are monitored: • For regions, countries, sectors and industry groups 10% deviation from the MSCI market index weight is allowed. • The maximum percentage that can be invested in a single stock is 2%. • A maximum of 20% can be invested outside the MSCI market index. Concentration limits are monitored by the portfolio management team and Compliance. Value-at-Risk Robeco’s Risk Management department monitors the absolute risk of the portfolio compared to the reference index: ‘Vol ratio’. The ratio limit for the Fund is set at 100% of the MSCI index. Stress Tests A regular market risk measure such as VaR fails to capture the tail risk of return distributions adequately. Stress tests are performed to analyse portfolio behaviour under extreme market events. The Risk Management team applies sensitivity scenarios using standardised shocks to risk factors (yield curve shifts, credit spread shifts, equity bust/boom, strong/weak Euro). The primary risk model used is Risk- Metrics. Liquidity Risk The focus is on two types of liquidity risk: market liquidity risk and funding liquidity risk. Market liquidity risk is the risk that assets cannot be liquidated at a reasonable price. Funding liquidity risk is the risk that client redemptions cannot be fulfilled. • For equity portfolios, Risk Management creates a daily report on market liquidity risk by comparing the positioning of the portfolios to trading volumes and market capitalisation. • Funding liquidity risk is monitored by analysing client profiles and periodic reports on the client base. Exception reports These reports are generated from the team’s portfolio database to identify events that are outside of what is considered a normal range, for instance, because of market movements. Examples include active share and pending mergers and acquisitions. The portfolio managers discuss these reports within the team. Human Overview All trades and positions are monitored and checked by a member of the investment team and verified by another member of the team (four-eyes principle). The objective of this human overview is to reduce risk.

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) INVESTMENT PROCESS & PORTFOLIO CONSTRUCTION 10

Trading/Implementation

Trade Execution Robeco’s dedicated Global Equity Trading desk consists of 10 seasoned professionals, who average more and Allocation than 15 years of industry experience. The traders are dedicated to equities. The Equity Trading desk has local presence in the Asian, European and American time zones. Orders are segmented on region, liquidity and size. The Trading Desk provides best execution by obtaining the best net price given liquidity characteristics, market conditions and the portfolio manager’s reasoning behind the investment decision. Pre- and post- trade analysis is part of Robeco’s transparent and repetitive trading process. Executions and partial executions (price and quantity) of trades are communicated by the broker-dealer through FIX, e-mail or telephone as soon as the trade has been executed (or at the end of the trading day at the latest). Then, the trader enters the executions in Charles River. This allows other traders and the portfolio manager to monitor the progress made by the trader with an order, whether the order has been filed, and at what time its execution was communicated. In case of partial executions, the trader confirms the outstanding balance of the order with the broker-dealer on the following day to prevent misunderstanding and/or to amend instructions.

Hedging & Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) is a hedged share class. In the Derivatives applicable guidelines for a 100% hedge target, there is a deviation of (+/-) 5% on the base currency AUD. This means that AUD hedge is managed within a 95% - 105% bandwidth on a total portfolio level. For non-base currencies (i.e. all currencies except the AUD), the limit is set on 0.50% of the total NAV.

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) CORPORATE GOVERNANCE / BUSINESS STRATEGY 11

Key Counterparties

Parent Company

Robeco is a subsidiary of RGNV (Robeco Groep N.V.), which management. The firm has clients in 54 countries, a heritage is the centre of asset management expertise for ORIX of over 85 years, and over 890 people employed at 15 offices Corporation, Robeco Group’s owner based in Tokyo, Japan. worldwide. ORIX Corporation is a diversified financial services provider and Responsible Entity Japan’s largest leasing company. It is headquartered in Tokyo and provides diversified financial services on a global scale, Equity Trustees (EQT) is a financial services company head- including asset management, leasing, lending, rentals, real quartered in Melbourne. Established in 1888 and listed on the estate, life insurance, banking, environmental and energy Australian Securities Exchange (ASX) in 1985, EQT provides a businesses. ORIX Corporation is listed on the Tokyo Stock range of products and services to a diverse client base including Exchange with a market capitalisation of approximately USD fund managers, managed funds, superannuation funds, and 21.4 billion and over 30,000 employees. financial planning. Equity Trustees acts as Responsible Entity Investment Manager / Fund Manager or Trustee for over 80 major Australian and international investment managers. Robeco Institutional Asset Management B.V. is responsible for The Board of Directors of the Responsible Entity (RE) consists of the day to day management of the DM Conservative Equities seven directors, six of whom are independent, including the Fund and is a related corporate body of Robeco Hong Kong Chairman. Limited. As Robeco’s European asset management arm, RIAM offers a broad range of equity and fixed income investments The Board’s key responsibility regarding EQT’s Responsible to a wide range of clients. It includes Robeco’s competence Entity activities is to ensure the company has adequate systems centres for pension-related investments, structured products, of internal controls and appropriate monitoring of compliance asset allocation, economic research and quantitative research. activities. As at June 2018, Robeco had A$264.1 billion in assets under

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) CORPORATE GOVERNANCE/BUSINESS STRATEGY 12

The Equity Trustees Board Charter (May-2018) mandates that Robeco Global DM Robeco Global DM the Board adhere to the following principles: Multi-Fact Equities Multi-Fact Equities Alpha AUD Alpha AUD Hedged • The Board will comprise an appropriate number of Date CPU CPU directors of whom a majority are independent non- 30-Jun-18 0.33 1.80 executive directors and ordinarily reside in Australia.

• The Board will be led by an independent chair who is not A General Note on Distributions for Managed Funds the same person as the Managing Director. The Responsible Entity of a Managed Fund will provide for a • Directors, collectively, are to have the appropriate regular schedule of distributions, such as monthly/quarterly/ balance of skills, knowledge, experience, independence semi-annual or annual. This is subject to the Fund having and diversity to enable it to discharge its duties and sufficient distributable income. The official total distributable responsibilities effectively. income available to pay to investors is determined for the period of that Fund’s financial year. By distributing the net • The Board assesses at least annually whether its Directors taxable income of the Fund to investors each year, a Fund itself are independent should not be liable for tax on its net earnings.

• Board meetings are to take place at least quarterly. If a Fund makes distributions more frequently than once over the financial year, those distributions will be based on estimates • Two members of the Board form a quorum. of the distributable income for that distribution period. The Management Risk final total amount of distributable income available for passing on to investors can only be calculated after the close of the Funds management businesses rely on the operational financial year, based on the Funds taxable income for that year. capabilities of key counterparties. A critical element is the corporate ability of the Responsible Entity to monitor If the total distributions a Fund pays out exceeds total tax operational performance and to meet the regulatory and income for that particular financial year, the excess amount may statutory responsibilities required. For any investment fund, be treated as a return of capital rather than income. This will there is a risk that a weak financial position or management possibly have tax implications for the investor. performance deterioration of key counterparties could Due to the considerations outlined above, there may be temporarily or permanently compromise their performance and periods in which no distributions are made, or a Fund may competency. This can adversely affect financial or regulatory make additional distributions outcomes for the Fund or associated entities. A Fund’s ability to distribute income is determined by the Based on the materials reviewed, SQM Research believes performance of the Fund and general market conditions. that Robeco and associated key counterparties are highly Accordingly, there is no guarantee a Fund will make a qualified to carry out their assigned responsibilities. distribution in any distribution period. Management risk is rated as being low. Funds under Management (FUM)

The Fund is approximately $24 million in size at Jan 2019. Distributions

The Fund has discretion in choosing the frequency of distributions. Distributions occur on a semi-annual basis, subject to the availability of distributable income. In a scenario where the Fund’s realised losses and expenses exceed income in a distribution period, the Fund may elect not to make a distribution during that time.

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) MANAGEMENT & PEOPLE 13

Key Investment Staff Name Responsibility / Position Location Years with Company Years with Industry Head of Factor Investing Equities & Portfolio Joop Huij Rotterdam 11.0 16.0 Manager, Head of Factor Index Research Simon Lansdorp Portfolio Manager Factor Investing Equities Rotterdam 9.0 10.0 Rob van Bommel Portfolio Manager Factor Investing Equities Rotterdam 28.0 28.0 Daniel Haesen Portfolio Manager Factor Investing Equities Rotterdam 15.0 15.0 Pim van Vliet Head of Conservative Equities & Portfolio Manager Rotterdam 13.0 18.0 Arlette van Ditshuizen Portfolio Manager Conservative Equities Rotterdam 21.0 21.0 Maarten Polfliet Portfolio Manager Conservative Equities Rotterdam 13.0 19.0 Jan Sytze Mosselaar Portfolio Manager Conservative Equities Rotterdam 14.0 14.0 Arnoud Klep Portfolio Manager Conservative Equities Rotterdam 17.0 17.0 Yaowei Xu Portfolio Manager Conservative Equities Rotterdam 4.0 14.0 Wilma de Groot Head of Core Quant Equities & Portfolio Manager Rotterdam 17.0 17.0 Michael Strating Portfolio Manager Core Quant Rotterdam 28.0 28.0 Tim Dröge Portfolio Manager Core Quant Rotterdam 18.0 19.0 Machiel Zwanenburg Portfolio Manager Core Quant Rotterdam 19.0 19.0 Jan de Koning Portfolio Manager Core Quant Rotterdam 3.0 13.0 Viorel Roscovan Factor Index Equity Research Rotterdam 3.0 14.0 Georgi Kyosev Factor Index Equity Research Rotterdam 5.0 7.0 David Blitz Head of Quant Research Rotterdam 23.0 23.0 Weili Zhou Selection Research Rotterdam 12.0 16.0 Bart van der Grient Selection Research Rotterdam 11.0 11.0 Matthias Hanauer Selection Research Rotterdam 4.0 9.0 Laurens Swinkels Selection Research Rotterdam 2.0 19.0 Milan Vidojevic Selection Research Rotterdam 4.0 4.0 Iman Honarvar Selection Research Rotterdam 1.0 6.0 Jornt Beetstra Selection Research Rotterdam 20.0 20.0 Frank Wirds Asia-Pacific Hong Kong 12.0 12.0 Bernhard Breloer Germany/ Switzerland Germany 4.0 9.0 Tom Naaijkens Asia-Pacific Hong Kong 17.0 21.0 Rob Radelaar North America Rotterdam 2.0 26.0 Gregory Taieb France France 1.0 15.0 Co-Head of Portfolio Engineering & Trading Equity Robbert Wijgerse Rotterdam 17.0 17.0 team Co-Head of Portfolio Engineering & Trading Equity Jacob Buitelaar Rotterdam 1.0 12.0 team Edwin Scheffers Equity Trader Rotterdam 9.0 21.0 Dennis Grashoff Equity Trader Rotterdam 28.0 28.0 Michel de Pater Equity Trader Rotterdam 37.0 37.0 Bastiaan Berendsen Equity Trader Rotterdam 12.0 12.0 Wouter Tilgenkamp Trading analyst Rotterdam 2.0 4.0 Kendall Tse Equity Trader Hong Kong 9.0 13.0 Natalie Lo Equity Trader Hong Kong 5.0 8.0 Tamara Botteldooren Equity Trader Boston 14.0 21.0

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) MANAGEMENT & PEOPLE 14

Investment Team

Robeco’s Multi-Factor strategies and the single factor strategies the portfolio managers benefit from the expertise of the Value, Momentum and Quality are managed by an experienced Robeco quantitative researchers. They are responsible for the team of investment professionals within an organisation which development and enhancement of quantitative models and is fully committed to quantitative investing. The head of the applications, which form the heart of our quantitative equities Factor Investing Equities team and portfolio manager is Joop product line. The quant group consists of more than 40 Huij, while Simon Lansdorp, Rob van Bommel and Daniel Haesen quantitative researchers and portfolio managers, of which 15 are also portfolio managers of factor investing strategies. focus on quant equities portfolio management.

The portfolio managers adopt a team approach, where all Finally, the Factor Investing Equities team cooperates with five the investment professionals work together to implement client portfolio managers who conduct product presentations the model’s ranking in the portfolio, and to monitor positions and reviews with clients and prospects. This enables the and risk exposure. In managing the factor investing strategies, portfolio managers to focus on their investment responsibilities.

Meeting Schedule

The table below shows regular meetings that form an important part of the overall process.

Meeting Agenda / Issues Frequency Participants Monday morning Managerial, an overview of resource allocation Weekly Portfolio management team team meeting and priority setting Quant equities team Managerial, organisational updates, research Weekly Quant equities PMs meeting and operations Quant equities PM Investments, knowledge sharing on systems Weekly Representatives of quant equities meeting and investment and implementation process Portfolio analysis Investments, topical in-depth portfolio analysis, Weekly Portfolio management team meeting review existing holdings against current market Investments, discuss and document stock- Human overview Representatives of quant equities PMs and specific human override decisions, such as Weekly meeting Equity Portfolio Implementation team related to M&A Researchers discuss their current projects, Research update Weekly Quant researchers hypotheses and progress Presentation of interim or final results of Research seminar Weekly Quant researchers research projects Quant equities PM Provide an update on the progress of research Representatives of Quant equities PMs and and research update Bi-weekly projects researchers meeting Quant Equity Models Head of Quant Research, head or senior Approval and recommendation of all research & Strategies Every six weeks members of quantitative equities teams and projects Committee the head of Investments Investments, knowledge sharing and discussion Monthly investment Equity and fixed income investment on the outlook for the market and economic Monthly meeting professionals trends Risk management, monitoring of statistical Risk management market risks and scenario stress tests, liquidity, Quarterly Representatives of equity teams committee counterparty risk

SQM Research believes the practice of constant communication and the broad-based inclusion of team members in decision-making is a vital ingredient to the success of the process. Interactive peer review and collaboration across a tightly knit group of experienced investors will likely make the best use of their combined intellectual property and shared history.

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) MANAGEMENT & PEOPLE 15

Staffing Changes

Departures Date Name Responsibility Reason for Departure Internal transfer. Was generalist selection Jul-2018 Joris Blonk Quantitative Researcher researcher; now fully focused on credits Jul-2018 Mark Voermans Portfolio manager (Factor Investing) Left to pursue other job opportunities. May-2017 Dennis Karstanje Quantitative Researcher External opportunity outside finance Internal transfer to Portfolio Engineering and Mar-2017 Willem Jellema Portfolio Manager (Factor Investing) Trading team Internal transfer. Was generalist selection Dec-2015 Jeroen van Zundert Quantitative Researcher (selection) researcher; now fully focused on credits

Additions / Hires Date Name Position / Responsibility Previous Position / Employer Portfolio Manager Robeco; Internal transfer from quantitative client Apr-2018 Jan de Koning (Core Quant equities) portfolio management Apr-2018 Gregory Taieb Client Portfolio Manager (France) State Street Global Advisors Portfolio Manager (Conservative Equities Robeco; Internal Transfer from fundamental EM Apr-2018 Yaowei Xu and Core Quant Equities) team Robeco; Internal transfer from quant allocation Mar-2018 Daniel Haesen Portfolio Manager (factor investing) research Robeco; Internal transfer from fundamental client Jan-2018 Rob Radelaar Client Portfolio Manager portfolio manager Nov-2017 Iman Honarvar Quantitative Researcher (selection) None Sep-2016 Mark Voermans Portfolio Manager (Factor Investing) APG Asset Management Sep-2016 Laurens Swinkels Quantitative Researcher (selection) Norges Bank Portfolio Manager Robeco; Internal transfer from Structured Jan-2016 Arnoud Klep (Conservative Equities) Investments team Robeco; Internal transfer from Pension Solutions Sep-2015 Tom Naaijkens Client Portfolio Manager team

SQM Research observes that the levels of investment experience and company tenure are strong across the entire investment team. The levels and nature of staff turnover are not an issue of concern, in SQM’s view.

Key Investment Staff Management and a Master’s in Informatics & Economics (cum laude) from Erasmus University Rotterdam. Joop Huij: Portfolio Manager, Head of Factor Investing Equities and Factor Index Research Simon Lansdorp: Portfolio Manager

Mr Huij, Portfolio Manager, Head of Factor Investing Equities Mr Lansdorp is Portfolio Manager within the Factor Investing and Head of Factor Indexing Research, is responsible for Value, Equities team and is responsible for Value, Momentum, Quality Momentum, Quality and Multi-Factor Equities strategies, and and Multi-Factor portfolios. His areas of expertise include factor Factor Indexes. He also holds a part-time position as Associate allocation, stock selection and portfolio construction. Within Professor (with tenure) of Finance at Rotterdam School of the Factor Investing Research team, he did factor-related Management. He has published in various academic journals research; developed the Value, Momentum and Quality factor including the Journal of Banking and Finance, Journal of strategies and (multi-)factor indexes; and built tailored factor Empirical Finance, Journal of Financial Markets, and Financial solutions. He has published in the Journal of Financial Markets. Analyst Journal. Mr Huij started his career as a researcher in Mr Lansdorp started his career in the industry as a Researcher at 2007. He holds a PhD in Finance from Rotterdam School of Robeco in 2009. He holds a PhD in Finance from the Tinbergen

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) MANAGEMENT & PEOPLE 16

Institute, and a Master’s in Economics from Erasmus University The granting of temporary allowance is solely role-based and Rotterdam. is not related to the performance of the employee or the firm.

Rob van Bommel: Portfolio Manager Variable Compensation

Mr. van Bommel is Portfolio Manager within the Factor Investing Variable compensation serves as a performance-driven Equities team and is responsible for Value, Momentum, Quality remuneration component. It is based on these following factors: and Multi-Factor portfolios. He is also Head of the Quant • Achievement on business objectives. For investment Equities Client Portfolio Management team. At Robeco, he was professionals, these typically include risk-adjusted returns Portfolio Manager UK Equities and subsequently Head of the over one, three and five years. European Equities team. He also managed International Equity portfolios for US institutional clients. During these years, Mr van • Business conduct and professional behaviour, which Bommel was closely involved in the establishment of Robeco’s includes acting in the best interest of the client and quantitative equity investing activities. He started his career in appropriate risk-taking. the industry at Robeco in 1990 as a Quant Analyst. Mr. van Bommel holds a Master’s in Business Economics from Erasmus • Financial results of the company as measured by EBIT. University Rotterdam. • Robeco applies a total compensation approach. The award Daniel Haesen: Portfolio Manager of overall compensation is assessed against local market remuneration practices for specific functions. Mr Haesen is Portfolio Manager within the Factor Investing Equities team and is responsible for Value, Momentum, Quality Variable compensation awarded to regular staff exceeding the and Multi-Factor portfolios. He specialises in factor research. Mr value of EUR 50k is subject to a deferral scheme. 60% of the Haesen started his career in the industry at Robeco in 2003 as total variable compensation is paid in cash in year one, the a Researcher with a focus on quant selection research, working remaining 40% are deferred equally over the next three years on both equity and corporate bond multi-factor selection and converted into ‘Robeco Cash Appreciation Rights’ (R-CARs), models. He was also responsible for quantitative sustainability the value of which reflects the financial results of the firm. and quantitative allocation research. He holds a Master’s in The Robeco remuneration policy meets all legal requirements, Econometrics and Quantitative Finance from Tilburg University including prudential remuneration rules from the AIFMD and in the Netherlands and is a CFA charterholder. UCITS. Remuneration and Incentives SQM Research believes access to firm equity, and client- focused performance bonuses act as strong incentives for Robeco investment professionals receive a market-based optimising staff engagement, retention and productivity. compensation package comprised of: The intention (and SQM believes, the effect) is to align staff performance with client and shareholder objectives. • Base salary It focuses on the customers’ needs and medium to long- • Variable compensation term results. Base Salary

Employees receive a fixed compensation which depends on education level, experience and remuneration for comparable jobs in the market. Specific temporary allowances may be granted for a maximum of three to five years:

• Strategic capability allowance to retain key investment professionals in strategic product capabilities

• Market-driven scarcity allowance in tight labour markets

• New business market allowance to set up activities in new countries or markets

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) PRODUCT FEATURES - FEES, REDEMPTION POLICY 17

Fees

Fees and Costs Fund Peer Avg Difference Management Fee (% p.a.) 0.65% 1.08% -0.43% Expense Recovery (% p.a.) Nil - - Performance Fee (%) Nil 10.00% - Indirect Cost Ratio ICR (% p.a.) 0.65% 1.10% -0.45% ICR Date: 30-Jun-18

Buy Spread (%) 0.13% 0.18% -0.05% Sell Spread (%) 0.10% 0.18% -0.08%

Other Features Fund Peer Avg Redemptions Daily - Distributions Semi-annual - Minimum Investment $10,000 $76,667 1 Year Investment: round Trip Cost 0.88% 1.44%

Buy/Sell Spread

This spread represents the difference between the application price and the withdrawal price of the Fund, a reflection of transaction costs relating to the underlying assets. Ongoing Fees

Management fee includes GST and is net of any applicable Reduced Input Tax Credits (RITC).

The management fee is calculated daily and paid monthly. Performance Fees

The Fund does not charge a performance fee.

Overall Fees

1 year Investment: Round Trip Cost

If held and redeemed within 12 months, total costs would amount to 0.88% of investment in the Fund. This figure includes the management fee, expense recovery (when disclosed) and the buy/sell spread. It does not consider rebates or negotiations or any potential performance fee.

SQM Research observes that the Fund management fee is 0.65% p.a., which is 43 basis points lower than the peer group average of 1.08% p.a.

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) QUANTITATIVE ANALYSIS 18

The Australian domiciled Fund has a very short history. To provide a broader perspective for analysis, SQM Research has also noted the returns of a simulation of three-factor funds which make up the MFEA unit trust (Simulation). This return data is reported as translated into AUD, therefore unhedged. The peer group is comprised of unhedged global equity funds, and the benchmark is MSCI ACWI NR AUD. This analysis is found in the Quantitative Analysis charts and tables below.

Simulation Risk/Return Data to 31 December 2018 Total Return 1-Month 3-Month 6-Month 1-Year 3-Year 5-Year Inception Fund 1 -3.81 -13.65 -8.97 -2.17 7.82 9.54 9.42 Benchmark 2 -3.58 -10.33 -4.52 0.64 7.77 9.38 6.78 Peer Average -3.16 -9.87 -4.34 2.25 8.32 9.62 6.57 Alpha -0.23 -3.32 -4.45 -2.81 0.06 0.16 2.64

Metrics 1-Year 3-Year 5-Year Inception Tracking Error (% p.a.) - Simulation 3.39 2.63 2.41 2.79 Tracking Error (% p.a.) - Peer Average 3.68 3.12 2.64 2.23 Information Ratio – Simulation -0.83 0.02 0.07 0.94 Information Ratio - Peer Average 0.66 0.12 0.10 -0.08 Sharpe Ratio – Simulation -0.20 0.85 1.04 0.88 Sharpe Ratio - Peer Average 0.24 0.84 0.97 0.60 Volatility - Simulation (% p.a.) 10.80 9.20 9.18 10.76 Volatility - Peer Average (% p.a.) 9.76 9.92 9.93 11.03 Volatility - Benchmark (% p.a.) 9.32 9.17 9.45 10.59 Beta based on stated Benchmark 1.11 0.96 0.94 0.98

1. Assumes dividend reinvestment. Returns one year and longer are annualised. Return history starts Dec-2003 2. Benchmark: MSCI ACWI NR AUD

Quantitative Insight1

Note: Unless otherwise stated, all return and risk data reported in this section are of the Simulation, after-fees and for periods ending Dec-2018.

Returns Excess Returns (Alpha)

Total Return % pa Excess Returns: over Benchmark & over Peers

2.64 2.85

9.54 9.38 9.62 9.42 8.32 7.82 7.77 0.16 6.78 6.57 0.06

-0.08 2.25 -0.49 0.64 -2.81

-2.17 -4.41 1-Year 3-Year 5-Year Inception 1-Year 3-Year 5-Year Inception Simulation Benchmark Excess over Benchmark Excess over Peer Average

The longer-term returns are consistent with the PDS objective and are consistent with SQM’s expectations for the Fund relative to its fee level and volatility.

1. Note: Sharpe and Information Ratios are not reliable comparison tools in periods where both the Fund and its peers/benchmark record a negative result

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) QUANTITATIVE ANALYSIS 19

Return Analysis Last 12 Last 12 Last 181 The risk outcomes as described above regarding volatility and Years Half-Years Months tracking error are consistent with the PDS statements about risk to Dec-18 to Dec-18 to Dec-18 and are in line with SQM’s expectations for this Fund. v.Bench v. Bench v. Bench Average outperformance 2.54 2.05 0.72 Drawdowns Average underperformance -1.47 -1.31 -0.59 Drawdown Summary No. of Periods of positive alpha 10 7 110 Drawdown Size (peak-to-trough) No. of Periods of negative alpha 2 5 71 Simulation Bench Peers Hit Rate 83.3% 58.3% 60.8% Average -5.65% -5.56% -5.43% Benchmark: MSCI ACWI NR AUD Number 17 16 16 As the table above shows, the quantum of outperformance has Best -0.68% -5.60% -5.37% been consistently greater than that of underperformance. The Worst -35.89% -37.70% -21.27% hit rate is also sound at 61% for monthly observations. Length of Drawdown (in months) Simulation Bench Peers Risk Average 8.3 9.7 9.8 Volatility % pa Length of Drawdown = time from peak to trough and back to previous peak level

10.80 10.76 10.59 11.03 The Simulation’s downside capture ratio over the three years 9.92 9.93 9.32 9.76 9.45 9.20 9.17 9.18 to Dec-18 was 84% compared to 98% for the peer average. Drawdowns have on average been in-line with the benchmark and peer average.

1-Year 3-Year 5-Year Inception Snail Trail Volatility - Simulation (% p.a.) Volatility - Benchmark (% p.a.) The snail trail chart and tables below depicts the combination of the Simulation’s rolling 3-year excess returns and rolling The Fund’s volatility (standard deviation of monthly returns) 3-year excess volatility. There are 146 observations in total. has tended to be around, or (at times) slightly higher than benchmark and peers. The tables below display the distribution of these observations across the risk/return quadrants as well as the overall frequency Tracking Error % pa of Outperformance v. Underperformance, and High-Vol v. Low- 3.68 3.39 3.12 Vol. 2.79 2.63 2.64 2.41 2.23 As shown in the last table entry, the Simulation is in the optimal upper left-hand quadrant (higher return, lower volatility) 53% of the time.

1-Year 3-Year 5-Year Inception Snail Trail Distribution by Quadrant Tracking Error (% p.a.) - Simulation Tracking Error (% p.a.) - Peer Average 146 datapoints Lower Vol Higher Vol Higher Return 78 68 The Fund’s tracking error (standard deviation of monthly Lower Return 0 16 excess returns) has been lower than peers, except for one year, Q1 (Optimal) where it was materially lower. Hi-Return, Low-Volatility 53% As another perspective, the Fund’s rolling 3-year volatility Single Factor Frequency (of monthly returns) has varied from a low of 7.99% p.a. Higher Return 100 to a high of 14.25% and averaged 10.60% over the rolling Lower Return 0% observations of the Fund’s lifespan. Over this same timeframe, Higher Volatility 47% the peer group rolling volatility ranged from a low of 8.76% per Lower Volatility 53% annum to a high of 14.51% and averaged 10.96%.

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) QUANTITATIVE ANALYSIS 20

(The analysis in the paragraph below looks at the performance 10.0% relationship of the Fund to the ASX300, a practice that SQM 7.5% has set as common across asset classes in Fund reviews. 5.0% This approach recognises that for the large bulk of financial 2.5% planner clients, their key traditional asset class risk regarding 0.0% size and volatility is to Australian equities. Exploring that Returns Returns -2.5% relationship is useful regardless of the asset class of the Fund

-5.0% itself, as it is helpful to understand how a Fund has acted in

Simulation: Rolling 3yr Excess Rolling 3yr Excess Simulation: times of Australian equity market stress in terms softening or -7.5% exaggerating the negative performance experienced at such -10.0% -10.0% -7.5% -5.0% -2.5% 0.0% 2.5% 5.0% 7.5% 10.0% times.) Simulation: Rolling 3yr Excess Volatility The table below details the ten largest negative monthly returns for the ASX 300 since the inception of the Simulation. Risk-Adjusted Returns This is compared to the Simulation’s performance over the same ten months. The correlation of the Simulation’s returns to the Sharpe Ratio ASX300 returns over this period is +44%. The Simulation

1.04 0.99 0.97 0.85 0.85 0.84 0.88 posted one positive returns compared to the ten negative 0.64 0.60 returns of the Australian stock market. 0.24 0.07 The sum of returns over those ten months was -82.10% for

-0.20 the ASX 300 and -37.74% for the Simulation, a difference of 1-Year 3-Year 5-Year Inception +44.36% in favour of the Simulation. Sharpe Ratio - Simulation Sharpe Ratio - Benchmark Sharpe Ratio - Peer Average These figures point to some defensive characteristics of the Information Ratio Simulation in the face of extreme equity tail risk.

0.94 Worst Market Returns vs Fund Return Same Month 0.66 Index: S&P/ASX 300 TR Timeframe: from Dec-03 to Oct-18 0.12 0.02 0.07 0.10

-0.08 Rank Date Market Fund Difference 1 Oct-08 -12.88% -4.14% 8.74% -0.83 1-Year 3-Year 5-Year Inception 2 Jan-08 -11.00% -9.90% 1.10% Information Ratio - Simulation Information Ratio - Peer Average 3 Sep-08 -9.94% -5.01% 4.93%

On a long-term basis, The Simulation displays strong risk- 4 Aug-15 -7.70% -2.49% 5.21% adjusted returns across the board for both Sharpe and 5 Jun-08 -7.57% -8.04% -0.47% Information ratios when compared to benchmark and peers. 6 May-10 -7.54% 1.70% 9.24% 7 May-12 -6.74% -1.28% 5.46% Correlation 8 Nov-08 -6.30% -5.30% 1.00% Correlation Min Max Avg 9 Sep-11 -6.28% -0.43% 5.84% 3 yr. rolling S&P/ASX 300 3.11% 75.66% 53.17% 10 Jan-10 -6.17% -2.86% 3.30% 3 yr. rolling MSCI World 90.39% 98.31% 96.08% TOTALS -82.10% -37.74% +44.36% 146 datapoints Correlation +43.8% Positive 1 out of 10 There is a moderate correlation of the Simulation’s returns with Outperform 9 out of 10 the S&P ASX300 index and a high correlation to global equities. The chart below shows how the Simulation’s tail risk correlation Tail Risk ranks relative to the broader universe of funds in its asset class.

The tail risk chart below shows a strong positive correlation with the ASX300 in times of equity market extremes.

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) QUANTITATIVE ANALYSIS 21

Correlation to Australian Equity Tail Risk 92% 100% 89% 87% The chart (left) shows how the 78% 80% 68% Simulation’s tail risk correlation ranks 58% relative to the broader universe of funds in 60% 53% 47% its asset class. 44% 38% 32% 40% 27% 18% 20%

0%

-20%

-40%

Correlation ASX300for Worstto Returns -45% -60% Max 95% 90% 80% 70% 60% 50% 40% 30% 20% 10% 5% Min Percentile Rank International Equities Universe Fund

Downside Capture Ratio in Tail Risk 120% 113% 106% Similarly, the chart (left) ranks the Simulation’s downside capture of these 100% 93% extreme 10 months of equity tail risk, 80% 76% against its asset class universe. 66% 59% 60% 50% 48% 44% 46% 41% 40% 36% 23% 20%

0%

Downside Capture relative to ASX300 -2% -20% Max 95% 90% 80% 70% 60% 50% 40% 30% 20% 10% 5% Min Percentile Rank International Equities Universe Fund

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) QUANTITATIVE ANALYSIS 22

Return and Risk

Rolling Returns Cumulative Excess Returns

Benchmark 3-yr Return Simulation 3-yr Return 3 yr Return Peer Avg 1 month Excess (RHS) Simulation: Cumulative Excess 35% 160% 4.0%

30% 140% 3.0% 25% 120% 2.0% 20% 100% 1.0% 15% 10% 80% 0.0%

5% 60% -1.0% 0% 40% -2.0% -5% 20% -3.0% -10% -15% 0% -4.0% Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Jun Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Jun Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Dec 18

Rolling Excess Returns Rolling Information Ratio

Simulation 3yr Excess Return 3 yr Excess Return Peer Avg Simulation 3yr Info Ratio 3 yr Info Ratio Peer Avg 8% 2.50

2.00 6% 1.50

4% 1.00

0.50 2% 0.00

0% -0.50

-1.00 -2% -1.50

-4% -2.00 Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Jun Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Jun Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Dec 18

Rolling Correlation to ASX 300 Rolling Tracking Error

Simulation: 3 yr Correlation with S&P/ASX 300 TR Peer Avg: 3 yr correlation to S&P/ASX 300 TR Simulation 3yr TE 3 yr TE Peer Avg 80% 5%

70% 5% 4% 60% 4% 50% 3% 40% 3% 30% 2% 20% 2% 10% 1% 0% 1%

-10% 0% Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Jun Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Jun Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Dec 18

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) QUANTITATIVE ANALYSIS 23

Return and Risk Tail Risk - Returns in Worst Australian Equity Down Rolling Volatility Markets over the Fund’s Lifespan

4% Benchmk Std Dev 3yr Simulation Std Dev 3yr 3 yr Volatility Peer Avg May-10 15% 2% 14% 0% May-12 Sep-11 13% Aug-15 -2% 12% Jan-10 -4% 11% Oct-08

10% -6% Sep-08 Nov-08

9% -8% Jun-08

8% SimulationReturn Same Month -10% Jan-08

7% -12% -14% -12% -10% -8% -6% -4% Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Jun Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 ASX300 since Dec-03

Drawdowns Rolling Sharpe Ratio

Benchmark Drawdown Simulation Drawdown Peer Avg Drawdown 3yr Sharpe Ratio Simulation 3yr Sharpe Ratio Peers 100 4.00 3.50 95 3.00 90 2.50 85 2.00 1.50 80 1.00 75 0.50

70 0.00 -0.50 65 -1.00 60 -1.50 Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Jun Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 17 Jun 18 Jun Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Dec 18

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) ASSET ALLOCATION & RISK PARAMETERS 24

The table below outline limits on the Fund’s asset allocation and other risk parameters:

Fund Constraints Permitted Range or Limit Maximum exposure to a single stock/company An absolute maximum of 2% is allowed Maximum exposure to a single sector 10% deviation from the MSCI World Index weight is allowed Maximum exposure to a single country 10% deviation from the MSCI World Index weight is allowed Maximum exposure to a geographic region 10% deviation from the MSCI World Index weight is allowed Limit for Holdings Not in Benchmark 20%

The Fund’s history of asset allocation, sector, country weights and other portfolio metrics are detailed below:

Fund Allocations over Time May-2018 to Jul-2018

Average Max Min as at Equity Sector Weight Weight Weight Jul-18 Financials 16.5% 17.1% 15.5% 17.1% Information Technology 18.8% 19.7% 17.7% 17.7% Health Care 10.4% 10.5% 10.3% 10.3% Consumer Discretionary 18.1% 18.7% 17.0% 17.0% Consumer Staples 4.6% 4.9% 4.1% 4.8% Energy 4.9% 5.2% 4.6% 4.9% Materials 7.4% 7.8% 7.1% 7.1% Industrials 9.2% 9.5% 8.9% 9.5% Telecommunications 4.3% 4.5% 3.9% 4.4% Utilities 0.8% 0.9% 0.8% 0.8% Cash 2.3% 3.3% 0.9% 3.3% Other 2.7% 3.1% 2.3% 3.1% Financials 16.5% 17.1% 15.5% 17.1%

Average Max Min as at Geographic Weight Weight Weight Jul-18 Australia 2.1% 2.4% 1.6% 2.4% USA 58.9% 61.6% 56.4% 56.4% Japan 12.0% 12.7% 10.9% 12.7% UK 5.3% 5.6% 5.0% 5.0% France 2.3% 2.5% 2.1% 2.3% Germany 2.2% 2.9% 1.4% 2.9% Other Europe 8.6% 9.0% 7.8% 9.0% Other Asia 3.8% 4.3% 3.2% 3.2% Other 4.8% 6.0% 3.7% 6.0%

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) ASSET ALLOCATION & RISK PARAMETERS 25

Average Max Min as at Currency Weight Weight Weight Jul-18 AUD 2.1% 2.4% 1.6% 2.4% USD 59.6% 62.4% 56.9% 56.9% EUR 9.4% 10.3% 7.9% 10.3% GBP 5.3% 5.6% 5.0% 5.0% CHF 0.5% 0.7% 0.4% 0.7% Other Europe 3.1% 3.3% 2.9% 3.2% JPY 12.0% 12.7% 10.9% 12.7% Other Asia 3.1% 3.5% 2.7% 2.7% Other 4.8% 6.0% 3.7% 6.0%

Recent Positioning

Comments from the Fund’s fact sheet dated Oct-2018 are reproduced below as a perspective on the Manager’s strategy and style.

Portfolio Highlights

This month the portfolio showed a negative absolute return of 7.8% (in AUD). The portfolio underperformed the MSCI World Index. The portfolio is divided into three sleeves that capture the Value, Momentum and Quality factor premiums. The three factors showed negative absolute returns but in a relative sense the Momentum factor detracted, while the Value and Quality factors remained largely flat.

Fund Composition as at Oct-2018

Top 10 Holdings (% of Fund)

Security Sector Weight Kohl’S Corp Consumer Discretionary 1.00 Seagate Technology Plc Information Technology 0.86 Ntt Docomo Inc Communication Services 0.78 Ww Grainger Inc Industrials 0.72 Fortinet Inc Information Technology 0.69 Lululemon Athletica Inc Consumer Discretionary 0.68 H&R Block Inc Consumer Discretionary 0.65 Target Corp Consumer Discretionary 0.65 Legg Mason Inc Financials 0.65 Liberty Global Inc Communication Services 0.65 7.32%

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) ASSET ALLOCATION & RISK PARAMETERS 26

Deviation from Equity Sectors Fund % Benchmark % Consumer Discretionary 17.4 +7.2 Information Technology 16.0 +0.5 Financials 15.0 -1.4 Industrials 11.2 +0.2 Health Care 9.9 -3.2 Communication Services 8.7 +0.4 Materials 8.1 +3.8 Consumer Staples 5.2 -3.4 Energy 4.8 -1.5 Real Estate 1.9 -1.0 Utilities 1.7 -1.4 Other 0.1 -0.2

Deviation from Country Fund % Benchmark % United States 58.7 -3.7 Japan 11.0 +2.6 United Kingdom 6.5 +0.5 Canada 3.7 +0.4 France 3.7 -0.1 Australia 2.9 +0.6 Germany 2.5 -0.6 Denmark 1.9 +1.3 Netherlands 1.9 +0.7 Israel 1.6 +1.4 Spain 1.3 +0.3 Hong Kong 1.0 -0.2 Other 3.3 -3.2

Robeco Global DM Multi-Factor Equities Alpha Fund (AUD Hedged) DISCLAIMER

Although all reasonable care has been taken to ensure that performance, no representation is made that any the information contained in this document is accurate, forecast, statement or estimate will be achieved or is neither SQM Research nor its respective officers, advisers accurate, and it is acknowledged that actual future or agents makes any representation or warranty, express operations may vary significantly from the estimates or implied as to the accuracy, completeness, currency or and forecasts and accordingly, all recipients will make reliability of such information or any other information their own investigations and inquiries regarding all provided whether in writing or orally to any recipient or its assumptions, uncertainties and contingencies which officers, advisers or agents. may effect the future operations of the business.

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