Balanced (MySuper) investment option 30 June 2015 This option invests in a wide range of assets, with a higher allocation to shares, infrastructure and property than fixed interest and cash. It’s designed for members seeking medium to long-term growth who are willing to accept short-term fluctuations in returns. Investment objective To outperform (after fees and taxes) the return of the median balanced fund, and an average annual return of CPI + 4% over the medium to long term. Strategic asset allocation (SAA) 2014/15 Actual asset allocation (AAA) 30 June 2015 Asset class SAA % Range % Asset class AAA % Australian shares 31 20–45 Australian shares 27.19 International shares 31 10–40 International shares 35.14 Direct property 9 0–30 Direct property 9.14 Infrastructure 13 0–30 Infrastructure 10.47 Private equity 3 0–10 Private equity 3.30 Fixed interest 10 0–25 Fixed interest 12.75 Cash 3 0–15 Cash 2.00 Other : Absolute return strategies 0 0–10 Other: Absolute return strategies 0.00 • Australian shares • Australian shares • International shares • International shares • Direct property • Direct property • Infrastructure • Infrastructure • Private equity • Private equity • Fixed interest • Fixed interest • Cash • Cash Investment costs Investment costs include investment management, custodian and asset consultant fees. They are calculated in arrears. Financial year ending 30 June 2014 Investment costs Investment performance fees Total investment costs 0.52% 0.07% 0.59% www.australiansuper.com/AdviserResources page 1 of 4 Top 20 managers* Top 20 International shares holdings‡ At 30 June 2015 At 30 June 2015 Manager Asset classes % Portfolio Stock Country Industry Funds weight % Australian shares (Indexed) 6.18 Management (IFM) 100 Amazon.com Inc USA 1.73 AustralianSuper Australian shares 5.91 Baidu Inc USA 1.51 MFS International shares 5.17 Tencent Holdings Limited Hong Kong 1.42 Baillie Gifford International shares 5.16 Illumina Inc USA 1.42 SSGA (USA) International shares 4.93 Time Warner Inc. USA 1.28 Bentham Fixed Interest 4.45 Visa Inc USA 1.25 Fidelity Australian shares 3.73 Accenture PLC-A USA 1.24 ISPT Property 3.64 The Walt Disney Co USA 1.23 IFM Int. Infrastructure 3.20 Facebook Inc-A USA 1.12 Orbis Global International shares 3.03 Oracle Corp USA 1.08 IFM Aust. Infrastructure 2.81 Nestle SA Reg Switzerland 1.03 Genesis International shares 2.61 Google Inc-C USA 1.03 Ind. Franchise Partners International shares 2.56 Reckitt Benckiser Group Great Britain 1.01 Jackson Square International shares 2.54 Thermo Fisher Scientific Inc USA 0.94 Alphinity Australian shares 2.47 Honeywell International USA 0.91 LSV International shares 2.23 Microsoft Corp USA 0.91 Airlie Funds Management Australian shares 2.15 Apple Inc USA 0.90 Perpetual Australian shares 2.11 Tesla Motors Inc USA 0.86 IFM Cash 2.00 Diageo Plc Great Britain 0.86 QIC Property 1.91 Medtronic Plc USA 0.80 * by percentage of funds under management for this option. ‡ by percentage of funds under management for AustralianSuper. Top 20 Australian shares holdings† Investment philosophy and approach At 30 June 2015 AustralianSuper is committed to delivering consistent investment returns over the medium to longer term, with an Portfolio Stock overriding objective of maximising the retirement benefits of weight % members within the risk framework of each investment option. Commonwealth Bank of Australia 8.57 The Fund’s investment philosophy is one of active management Westpac Banking Corporation 6.61 of the portfolio through a mix of investment styles. This is BHP Billiton Limited 5.65 reflected in a number of ways, including: National Australia Bank Limited 5.63 › regular review of asset allocation ANZ Banking Group Limited 5.56 › reviewing and monitoring investment managers Telstra Corporation Limited 5.28 › monitoring market developments Wesfarmers Limited 3.29 › monitoring new investment instruments and products CSL Limited 2.82 › focusing on the net return to members. Macquarie Group Limited 2.35 The Fund also seeks to enhance members’ returns by controlling Suncorp Group Limited 2.11 the cost of investing. This is achieved by negotiating competitive Rio Tinto Limited 1.97 fees with investment managers and other service providers and Transurban Group Limited 1.96 actively managing the tax paid by the Fund. Caltex Australia Limited 1.32 The Investment Committee is accountable to the Trustee Board QBE Insurance Group 1.27 for the investment policy and strategy of the Fund and for Healthscope Limited 1.26 overseeing investment decisions, including any matters referred to it by the Trustee Board. It meets monthly or more frequently Woolworths Limited 1.24 when required. Insurance Australia 1.22 The internal Investment team, headed by Chief Investment AMP Limited 1.15 Officer (CIO) Mark Delaney, advises the Investment Committee Aurizon Holdings Limited 1.14 on all investment matters. The team is responsible for research Oil Search Limited 1.05 and portfolio management and works closely with the appointed † by percentage of funds under management for AustralianSuper. asset consultants in monitoring investment managers and preparing input for asset allocation discussions. page 2 of 4 Balanced (MySuper) investment option Investment style and process AustralianSuper has a well-defined investment decision making process, which governs the activities and interaction between the Trustee Board, Investment Committee, in house Investment Team and the two principal external asset consultants Frontier and JANA. Currently AustralianSuper primarily employs a ‘manager of managers’ investment approach. We aim to engage the best investment managers globally to manage each asset class. The investment process has five key stages. All major decisions go through three check points – our external investment consultants, the internal Investment Team and the Investment Committee. External asset consultants AustralianSuper has two external asset consultants Frontier Advisors and JANA Investment Advisers. Both provide strategic advice and research on specific asset sectors. They also provide input to strategic and active asset allocation decisions. Frontier: Frontier is responsible for Australian shares, direct property, infrastructure and private equity. JANA: JANA is responsible for international shares, currency, fixed income, cash and absolute return strategies. AustralianSuper’s investment decision making process Trustee Board Investment Committee Internal Investment Committee Investment Department Asset Consultants External Fund Managers Internal investment management Strategic asset allocation With the rapid growth of AustralianSuper over recent years, The Investment Committee determines the strategic asset it makes better sense for us to bring investment expertise allocation (SAA) and asset allocation ranges for each investment in-house. While providing more input into and control over option annually. investment decisions, it also reduces our costs and reliance on The SAA serves as a guide for the allocation of new funds external consultants and managers. We see the biggest benefit received into each investment option but is tempered by tactical being lower costs being passed through to members through decisions, taken at the monthly Investment Committee meeting better returns. for the allocation of cash flows. We do not automatically In the second phase of a five year plan, we have made rebalance the investment options back to the SAA. significant inroads on our internal management strategy. The Investment Committee reviews the asset allocation at The internal Australian equities team is in place and has been each meeting in light of current economic conditions and actively managing a portfolio that has already delivered strong the market outlook. net benefits for our members. Decisions on the SAA and the short-term asset allocation Our infrastructure team has participated in a few large direct strategy draw on research performed by the internal investment investments that have seen significant savings in management team and the Fund’s two principal asset consultants, Frontier fees and positive contributions to returns. and JANA. The output is synthesised into a paper for the The property team has been expanding its international portfolio, Investment Committee. establishing partnerships in the US, UK and Europe, as well as Australia. These partnerships help us identify opportunities and Currency manage the day-to-day running of direct acquisitions. Currency hedging can protect portfolios with international The next phase will see internal capabilities expanded to cover assets from adverse movements in exchange rates. It involves Australian small cap equities, international equities, direct loans converting a percentage of the value of a portfolio’s international and credit instruments. assets into Australian dollars. When we set our strategic asset allocations every year we set a target currency exposure for each investment option that includes international assets. Target currency Actual exposure Investment option exposure 2014/15 30 June 2015 Balanced option 23.0% 23.81% www.australiansuper.com/AdviserResources page 3 of 4 Portfolio structure Monitoring and review In structuring the portfolio, we first look at the objectives for Each asset class is monitored at the total asset class level each asset class to guide the overall construction of the asset and at the manager level. class. Managers and investments are then selected to meet the At the portfolio level we look to ensure that