BT Personal Portfolio Service: Superannuation and Pension. Annual Report for the year ended 30 June 2009

Transcription

1 BT Personal Portfolio Service: Superannuation and Pension Annual Report for the year ended 30 June 2009

2 Contents 3 Recent developments and changes 6 Investment overview 9 Understanding the risks of investing Performance Overview 12 Superannuation Service 15 Pension Service Investment Portfolios 18 Westpac Classic 22 Westpac 28 Investment strategies 31 Other Fund Managers 58 Other Information Introduction About the Trustee The Trustee, Westpac Securities Administration Limited, is pleased to present the 2009 Annual Report for BT Personal Portfolio Service: Superannuation and Pension (the Service). This Annual Report is dated 15 December Westpac Securities Administration Limited (the Trustee) (ABN , AFSL No , RSE L ) is the trustee and issuer of the BT Personal Portfolio Service: Superannuation and Pension (RSE R ). The Trustee is a wholly owned subsidiary of the Westpac Banking Corporation ABN (Westpac). Trustee address: Level 20, Westpac Place, 275 Kent Street, Sydney, NSW 2000 BT Personal Portfolio Service: Superannuation and Pension is issued under a subplan of the Westpac MasterTrust Superannuation Division (RSE R ).The Service wholly invests in a life insurance policy issued by Westpac Life Insurance Services Limited ABN (Westpac Life) from its No. 2 Statutory Fund. Westpac Life holds an Australian Financial Services Licence, AFSL No and is responsible for the day to day administration of the Service. Information in relation to the other fund manager investment portfolios is based on material issued by the other fund managers.

3 Recent developments in superannuation Changes to superannuation thresholds Each year, various thresholds used in the calculation of superannuation benefits and limits are indexed to keep pace with Average Weekly Ordinary Time Earnings (AWOTE). Some of the thresholds that apply for the 2009/10 financial year are as follows: Low rate cap: $150,000 Concessional contributions cap: >Age 50 or over $50,000 >Under age 50 $25,000 Non-concessional contributions cap: $150,000 Capital Gains Tax (CGT) Cap (lifetime limit): $1,100,000 Government Co-contributions: >Maximum co-contribution 1 $1,000 >Lower threshold $31,920 >Upper threshold (cut off) $61,920 1_ the maximum co-contribution payable is phased out by cents for every dollar of total income over the lower threshold, until it reaches zero at the upper threshold. Increase in personal income tax thresholds Personal income tax thresholds changed from 1 July The table below sets out the tax thresholds and rates for resident individuals for the 2009/10 financial year. New tax thresholds from 1 July 2009 New tax rates from 1 July 2009 Income ranges ($) () 0 6, ,001 35, ,001 80, , , ,

4 Recent developments in superannuation Government superannuation co-contribution A temporary reduction of the co-contribution matching rate from 150 to 100 will apply for the period 1 July 2009 to 30 June 2012 after which it will gradually return to the current rate as shown in the table below to and Matching rate Maximum co-contribution $1,000 $1,250 $1,500 Phase out rate cents cents 5 cents onwards This means, for 2009/10, if you meet the Government co-contribution eligibility criteria, make a personal after-tax contribution and your total income is less than $31,920 the Government will contribute $1.00 for each dollar you contribute up to $1,000. The maximum co-contribution payable is phased out by cents for every dollar you earn over $31,920, until your total income reaches $61,920. Concessional contributions cap For 2009/10 financial year, the concessional contributions cap is reduced from $50,000 to $25,000 per member. In subsequent years, the concessional contributions cap will be indexed to Average Weekly Ordinary Time Earnings (AWOTE), rounded down to the nearest $5,000. The transitional concessional contributions cap is reduced from $100,000 to $50,000 (not indexed) per member per year for 2009/10, 2010/11 and 2011/12 (transitional financial years). The transitional cap applies to members aged 50 or over at any time in a transitional financial year. From 1 July 2009, the non-concessional contributions cap is set at six times the concessional contributions cap. This means for 2009/10 the non-concessional cap will remain at $150,000 (six times the concessional contributions cap of $25,000). 4

5 Minimum pension payments Unclaimed money The Government has provided relief from the minimum pension payment requirements for the 2009/10 financial year. This means that your minimum pension payment specified by Government regulations will be halved for the year ended 30 June For example, if your minimum payment requirement for the 2009/10 financial year was $10,000, you will be able to choose to take a payment of only $5,000 for the financial year. From 1 July 2010, the Superannuation Service is required to transfer to the ATO an account of a lost member: > > with a balance of less than $200; or > > which has been inactive for a period of five years and the trustee Is satisfied that it will never be possible to pay an amount to the member. If your account balance is transferred you will be able to reclaim it from the ATO. Upcoming legislative changes Trans-Tasman retirement savings portability scheme On 12 May 2009, the Government announced that it has agreed in principle to establish a trans-tasman retirement savings portability scheme. The scheme aims to permit transfers of superannuation savings between certain Australian superannuation funds and New Zealand KiwiSaver funds. To date, while a Memorandum of Understanding has been signed by Australia and New Zealand, no legislation has been introduced to Parliament and the start date of the scheme has not yet been determined. 5

6 Investment overview s of the Service currently invest in a policy issued by Westpac Life Insurance Services Limited (represents 100 of the assets of the Service). The Service does not invest directly in derivatives securities. The investment objective, strategy, asset mix and return for each investment portfolio are shown on the following pages. Investing in the Service Westpac Investment Portfolios Other Fund Manager Investment Portfolios The Service has a range of Investment Portfolios. Members can choose to invest in any combination of these investment portfolios. You can switch between investment portfolios at any time. The Trustee, in conjunction with professional investment specialists, from time to time sets a core asset mix and strategic range for each investment sector for each of the Westpac Classic Strategies. The core asset mix represents the current long term investment allocation in each asset sector that aims to achieve the objective of each Westpac Classic Strategy. The strategic ranges represent the current maximum and minimum that each Westpac Classic Strategy can invest in each sector. The actual percentage invested in each asset sector at any time may be different from the core mix (but usually within the strategic range) due to the impact of market movements, cash flows or investment decisions undertaken in the strategies. The Service also includes investment portfolios from selected other fund managers. These other fund managers include: BT Funds Management Limited 1, Aberdeen Management, Macquarie Investment Management Limited, MLC Investments Limited, Colonial First State Investment Managers (Australia) Limited, BlackRock, Schroder Investment Management Australia Limited and UBS Global Management. The Trustee s investment objective for these other investment portfolios is to achieve returns in line with the underlying fund, before the deduction of fees and expenses charged by the Service and tax. The Trustee aims to meet this objective by investing either directly in the underlying fund or indirectly through collective investments (such as life policies or unit trusts) which in turn invest in the underlying fund. Further information on the underlying fund s investment objectives and strategies is shown on pages 18 to 55. This is based on information provided by the respective fund managers. 6 1_ BT Funds Management is a fully owned subsidiary of the Westpac Group.

7 Derivatives Net Earnings These are investments whose value is derived from other assets such as shares, and may be used as part of the portfolio management process. Futures contracts and options are examples of derivatives. Derivatives may be used to reduce risk and can act as a hedge against adverse movements in a particular market and/or in the underlying asset. Derivatives can also be used to gain exposure to assets and markets. While derivatives offer the opportunity for significantly higher gains from a smaller investment (because of the effective exposure obtained) they can also produce significantly higher losses, sometimes in excess of the amount invested. The Service does not invest directly in derivative securities and the use of derivatives to gear the investment portfolios is not permitted. The earnings rate for members of the Service is reflected in the price of the units, rather than being credited or debited against the accounts of members. A change in the value of the members units reflects the earnings of the assets in the investment portfolio. 7

8 Investment overview Net value of an Investment Portfolio The net value of an Investment Portfolio is the value of all investments and cash held by the Investment Portfolio less amounts owing or payable in respect of the Investment Portfolio including any provision that is considered necessary. For example, provision might be made for possible future losses on an investment that is considered to be overvalued or cannot be fairly determined. A full description of the valuation method is given in the Trust Deed. The net value of an Investment Portfolio may include an asset known as Future Income Tax Benefit (FITB). A FITB arises when, for tax purposes, a loss is available to offset a future gain (ie so as to reduce the amount of gain that might otherwise be taxable). Our policy is to recognise FITBs as a separate asset of the relevant Investment Portfolio. Like any other asset in an Investment Portfolio, the value of a FITB is reflected in the unit price for that Investment Portfolio, through the calculation of the net asset value. The value of a FITB can change over time based on the likelihood of being able to offset the losses against future gains and the time at which they can be used. Accordingly, changes in the value of a FITB asset may cause unit prices to change (as is the case with a change in the value of any other asset in the Investment Portfolio). The level of FITB recorded in the unit price of an Investment Portfolio may be capped, taking into account the probability that accrued losses are able to be offset against future gains. The Joint ASIC and APRA Unit Pricing Guide to Good Practice, and BT policy require that FITB only be recognised in the net asset value and unit price of an Investment Portfolio to the extent that the deferred tax benefit is expected to be realisable in the future. It may be necessary to reduce the level of FITB to ensure that the value of the investment Portfolio (and the unit price) is not over-stated. 8

9 Understanding the risks of investing No matter which investment portfolio you choose to invest in, there will always be some level of investment risk. Investment risk is often described as the risk of fluctuations in the market price of a particular investment. Investment risk can be managed and even minimised, but cannot be completely eliminated. No matter how skilled the investment manager, or however strong an investment portfolio s performance has been in the past, there is always a chance you could receive back less than you invested. You may lose money no matter which investment portfolio you invest in. You should be aware of these risks when investing and understand that not all risks are foreseeable. You can allocate your money to any of the investment portfolios available and in any combination, subject to any minimum requirements. You can also change your allocation at any time, free of charge. Some of the most common types of risks associated with investing in the investment portfolios include: Market risk Security-specific risk International investments risk Currency risk Markets are subject to a host of factors, including economic conditions, government regulations, market sentiment, local and international political events and environmental and technological issues. Market risk may have different impacts on each investment and investment style in that market at different times. An investment in a company may be affected by unexpected changes in that company s operations (such as changes in management or loss of a big customer) and business environment. Investing internationally in one of the major asset classes will give exposure to different or potentially greater risks that are not associated with investing in Australia. International investments may be affected by political and economic uncertainties, lower regulatory supervision, movements in foreign currency and interest rates and more volatile, less liquid markets. For investments in international assets, a rise in the Australian dollar relative to other currencies may negatively impact investment values and returns. 9

10 Understanding the risks of investing Interest rate risk Credit risk Liquidity risk Alternative Investments risk Derivative risk Changes in interest rates can have a direct or indirect impact on the investment value and/or returns of all types of assets. Interest rates may affect a company s cost of borrowings as well as the value of fixed interest securities. Credit risk refers to a risk of loss arising from the failure of a borrower or other party to a contract to meet its obligations. This may arise in securities such as derivatives, fixed interest securities and mortgage securities. This is the risk that an investment may not be easily converted into cash with little or no loss of capital and minimum delay. Securities of small companies in particular may, from time to time become less liquid. Alternative Investments may have exposure to any of the risks outlined in this section even though these investments have a different risk/return profile to traditional investments. Alternative Investments may have less liquidity, they may use gearing that magnifies both gains and losses and they may use short selling. Short selling involves obligations to purchase shares at some later date. Theoretically there is no limit to how high a share price may rise; there is also no limit on the losses that can be incurred from short selling, so this increases market and operational risk. The value of derivatives is linked to the value of the underlying assets and can be highly volatile. Potential gains and losses from derivative transactions can be substantial. 10

11 Other risks Product risk To maintain the quality and diversity of our product range of investment portfolios we may make a number of changes to the investment portfolios at any time including: > > adding, closing or terminating an investment portfolio; > > changing an investment portfolio s objective, investment strategy, asset allocation neutral position or ranges or currency strategy (if any); > > removing or adding an investment manager; and > > changing the rules that govern an investment portfolio (eg changing fees, changing notice periods or withdrawing features). In some cases we can do these things without prior notice to members. Change to superannuation law Changes to taxation Changes are frequently made to superannuation law, which may affect your investment including how and when you can access your superannuation. Changes can also occur to the taxation of superannuation, which may affect the value of your superannuation investment. 11

12 Performance overview Superannuation Service Performance figures are calculated in accordance with the Investment & Financial Services Association (IFSA) standards. Total returns are calculated: > > using withdrawal prices appropriate for the month end > > taking into account management costs (other than member fees and issuer fees) of the relevant investment portfolio, and > > taking into account earnings tax up to a maximum of 15 plus withholding tax paid on foreign income (if any). Investment returns shown are historical. Investment returns can go up and down. Past performance is not a reliable indicator of future performance. Future performance is not guaranteed. 12 Investment Portfolio Start One year returns to 30 June 5 years compound average or since date inception (if shorter) to 30 June pa Dynamic Growth Feb Balanced Growth Feb Diversified Growth Jan Moderate Growth Jan Conservative Growth Feb Cash and Short-term securities Jan Australian Fixed Interest Jan International Fixed Interest Jan Property Jan Australian Shares Jan Australian Sustainability Shares Jun International Sustainability Shares Jul International Shares Jan BT Wholesale Conservative Outlook Fund Jan BT Wholesale Balanced Returns Fund Jan BT Wholesale Australian Shares Fund Jul BT Wholesale International Share Fund Aug BT Wholesale Asian Share Fund May BT Wholesale European Share Fund May BT Wholesale Partner Australian Share Value 1 May BT Wholesale Partner Australian Share Core 1 Jun BT Wholesale Partner Australian Share Growth 1 Jun BT Wholesale Partner International Share Value 1 May BT Wholesale Partner International Share Growth 1 Jun BT Sustainable Conservative Fund Feb _ Performance since inception is shown here where this period is less than 5 years.

13 Investment Portfolio Start One year returns to 30 June 5 years compound average or since date inception (if shorter) to 30 June pa BT Wholesale Core Australian Share Fund Sep BT Wholesale Active Balanced Fund Jan BT Wholesale Smaller Companies Fund Jul BT Wholesale Core Global Share Fund Jun BT Wholesale Geared Imputation Fund May BT Wholesale Core Hedged Global Share Fund Jun BlackRock Scientific Australian Equity Fund May BlackRock Scientific Diversified Stable Fund Jan BlackRock Scientific Diversified Growth Fund Feb BlackRock Scientific International Equity Fund Jul Colonial First State Wholesale Imputation Fund Jul Colonial First State Wholesale Diversified Fund May Colonial First State Wholesale High Growth Fund Jun Aberdeen Select Investment Australian Share Jun Fund Aberdeen Select Investment Capital Growth May Fund Aberdeen Select Investment International Share May Fund Aberdeen Australian Equities Fund May (formerly Deutsche Australian Equities Alpha Fund) Macquarie Master Enhanced Cash Fund Feb Macquarie Master Fixed Interest Fund Jan Macquarie Master Australian Enhanced Equities Feb Fund Macquarie Master Property Securities Fund Feb Macquarie Wholesale Fixed Interest Fund Jul Macquarie Wholesale Property Securities Fund Jul _ Performance since inception is shown here where this period is less than 5 years. 13

14 Performance overview Superannuation Service Investment Portfolio Macquarie Wholesale Australian Enhanced Equities Fund Start One year returns to 30 June 5 years compound average or since date inception (if shorter) to 30 June pa Jul BlackRock Wholesale Managed Income Fund Feb BlackRock Wholesale Balanced Fund Feb BlackRock Global Small Cap Fund Jun BlackRock Wholesale Australian Share Fund May (formerly Merrill Lynch Wholesale Imputation Fund) MLC Wholesale Horizon 4 Balanced Portfolio Jul MLC Wholesale Property Securities Fund Jul MLC Wholesale Australian Share Fund Dec MLC Wholesale Horizon 5 Growth Portfolio Aug MLC Wholesale Global Share Fund Oct MLC Wholesale Platinum Global Fund May MLC Wholesale Income Builder May Platinum International Fund Sep Schroder Wholesale Australian Equity Fund Jun Schroder Hybrid Securities Fund Wholesale Class May UBS Australian Share Fund Jun UBS International Share Fund May _ Performance since inception is shown here where this period is less than 5 years. 2_ This performance percentage was corrected due to an error in the previously reported percentage of This was communicated in the PPS December 2006 Quarterly Statement. 3_ For the period since commencement to 30 June 2005 (not annualised).

15 Performance overview Pension Service Performance figures are calculated in accordance with the Investment & Financial Services Association (IFSA) standards. Total returns are calculated: > > using withdrawal prices appropriate for the month end, and > > taking into account management costs (other than member fees and issuer fees) of the relevant investment portfolio. No reduction is made to the unit price (or performance) to allow for tax you may pay as an investor, other than withholding tax paid on foreign income (if any). Investment returns shown are historical. Investment returns can go up and down. Past performance is not a reliable indicator of future performance. Future performance is not guaranteed. Investment Portfolio Start One year returns to 30 June 5 years compound average or since date inception (if shorter) to 30 June pa Dynamic Growth May Balanced Growth Apr Diversified Growth Feb Moderate Growth Feb Conservative Growth Feb Cash and Short-term securities Feb Australian Fixed Interest Mar International Fixed Interest Jul Property Feb Australian Shares May Australian Sustainability Shares Jun International Sustainability Shares Jul International Shares Nov BT Wholesale Conservative Outlook Fund Feb BT Wholesale Balanced Returns Fund Feb BT Wholesale Australian Shares Fund Jul BT Wholesale International Share Fund Jul BT Wholesale Asian Share Fund May BT Wholesale European Share Fund Jul BT Wholesale Partner Australian Share Value 1 Jun BT Wholesale Partner Australian Share Core 1 Jun BT Wholesale Partner Australian Share Growth 1 May BT Wholesale Partner International Share Value 1 Jun BT Wholesale Partner International Share Growth 1 Jun BT Sustainable Conservative Fund Apr _ Performance since inception is shown here where this period is less than 5 years. 15

16 Performance overview Pension Service Investment Portfolio Start One year returns to 30 June 5 years compound average or since date inception (if shorter) to 30 June pa BT Wholesale Core Australian Share Fund Aug BT Wholesale Active Balanced Fund Mar BT Wholesale Smaller Companies Fund Jun BT Wholesale Core Global Share Fund May BT Wholesale Geared Imputation Fund Mar BT Wholesale Core Hedged Global Share Fund Jun BlackRock Scientific Australian Equity Fund Jun BlackRock Scientific Diversified Stable Fund Feb BlackRock Scientific Diversified Growth Fund Feb BlackRock Scientific International Equity Fund Jul Colonial First State Wholesale Imputation Fund Jul Colonial First State Wholesale Diversified Fund May Colonial First State Wholesale High Growth Fund Jun Aberdeen Select Investment Australian Share Jun Fund Aberdeen Select Investment Capital Growth Jun Fund Aberdeen Select Investment International Share Jun Fund Aberdeen Australian Equities Fund Jun (formerly Deutsche Australian Equities Alpha Fund) Macquarie Master Enhanced Cash Fund Apr Macquarie Master Fixed Interest Fund Mar Macquarie Master Australian Enhanced Equities Jun Fund Macquarie Master Property Securities Fund Jun Macquarie Wholesale Fixed Interest Fund Aug Macquarie Wholesale Property Securities Fund Aug _ Performance since inception is shown here where this period is less than 5 years.

17 Investment Portfolio Macquarie Wholesale Australian Enhanced Equities Fund Start One year returns to 30 June 5 years compound average or since date inception (if shorter) to 30 June pa Aug BlackRock Wholesale Managed Income Fund Feb BlackRock Wholesale Balanced Fund Mar BlackRock Global Small Cap Fund Jun BlackRock Wholesale Australian Share Fund May (formerly Merrill Lynch Wholesale Imputation Fund) MLC Wholesale Horizon 4 Balanced Portfolio Aug MLC Wholesale Property Securities Fund Aug MLC Wholesale Australian Share Fund Aug MLC Wholesale Horizon 5 Growth Portfolio Sep MLC Wholesale Global Share Fund Oct MLC Wholesale Platinum Global Fund Jun MLC Wholesale Income Builder May Platinum International Fund Sep Schroder Wholesale Australian Equity Fund May Schroder Hybrid Securities Fund Wholesale Class May UBS Australian Share Fund May UBS International Share Fund Jun _ Performance since inception is shown here where this period is less than 5 years. 2_ This performance percentage was corrected due to an error in the previously reported percentage of This was communicated in the PPS December 2006 Quarterly Statement. 3_ For the period since commencement to 30 June 2005 (not annualised). 17

18 Investment Portfolios Westpac Classic Strategies Investment objective Investment strategy Dynamic Growth Aims to maximise capital growth over the long term from a dynamic portfolio that includes a high proportion of Australian and international shares. Investing either directly in assets or indirectly through collective investments (such as life policies or unit trusts) so that a significant proportion of assets, normally between 60 and 80, is invested in Australian and international shares. This means that the likelihood of short-term fluctuations in capital value is expected to be greater than with other investment portfolios offered. mix () The Trustee has set a neutral position and strategic range for each of the investment sectors as shown in the table right. In addition, the table shows the actual asset mix between the underlying sectors at 30 June 2008 and 30 June 2009: Neutral position ranges Superannuation Australian shares International shares Australian fixed interest International fixed interest Property Cash Pension Australian shares International shares Australian fixed interest International fixed interest Property Cash

19 Balanced Growth Aims to provide a high level of capital growth over the long term from a balanced portfolio of assets. Diversified Growth Aims to provide capital growth over the medium to long term from a portfolio that is well diversified among the major asset classes. Investing either directly in assets or indirectly through collective investments (such as life policies or unit trusts) so that the underlying assets of the investment portfolio include assets with long-term growth potential such as Australian and international shares and property. Investing either directly in assets or indirectly through collective investments (such as life policies or unit trusts) so that the underlying assets: > > consist of a diversified portfolio across the major investment sectors > > have a significant emphasis on fixed interest and Australian and international shares. Neutral position ranges Neutral position ranges Superannuation Australian shares International shares Australian fixed interest International fixed interest Property Cash Pension Australian shares International shares Australian fixed interest International fixed interest Property Cash Superannuation Australian shares International shares Australian fixed interest International fixed interest Property Cash Pension Australian shares International shares Australian fixed interest International fixed interest Property Cash

20 Investment Portfolios Westpac Classic Strategies Investment objective Investment strategy Moderate Growth Aims to provide a moderate level of capital growth over the medium term and a moderate level of interest earnings. Investing either directly in assets or indirectly through collective investments (such as life policies or unit trusts) so that: > > the majority of the underlying assets provide income for reinvestment. Such assets include bank-backed bills and cash on deposit as well as Australian and international fixed interest > > a portion of the underlying assets of the investment portfolio includes growth assets, such as shares and property, to provide potential for higher returns. mix () The Trustee has set a neutral position and strategic range for each of the investment sectors as shown in the table right. In addition, the table shows the actual asset mix between the underlying sectors at 30 June 2008 and 30 June 2009: Neutral position ranges Superannuation Australian shares International shares Australian fixed interest International fixed interest Property Cash Pension Australian shares International shares Australian fixed interest International fixed interest Property Cash

21 Conservative Growth Aims to provide a conservative level of capital growth over the medium term and a relatively high level of interest earnings. Investing either directly in assets or indirectly through collective investments (such as life policies or unit trusts) so that: > > most of the underlying assets provide income for reinvestment. Such assets include bank-backed bills and cash on deposit > > part of the underlying assets of the investment portfolio includes growth assets, such as shares and property, to provide potential for higher returns. Neutral position ranges Superannuation Australian shares International shares Australian fixed interest International fixed interest Property Cash Pension Australian shares International shares Australian fixed interest International fixed interest Property Cash

22 Investment Portfolios Westpac Funds Investment objective Australian shares Aims to provide access to capital growth and dividends from investment in Australian shares. Investment strategy Investing either directly in assets or indirectly through collective investments (such as life policies or unit trusts) so that the underlying assets: > > consists of a selection of shares of companies that offer potential returns from long term growth and company dividends > > provide exposure to both industrial and resource shares with a focus on those companies perceived to have the best potential for long term returns. mix () The Trustee has set a neutral position and strategic range for each of the investment sectors as shown in the table right. In addition, the table shows the actual asset mix between the underlying sectors at 30 June 2008 and 30 June 2009: Neutral position ranges Superannuation Australian shares Cash 0 10 Pension Australian shares Cash

23 International shares Aims to provide medium to longer term capital growth from investment in a selection of overseas share markets. Investing either directly in assets or indirectly through collective investments (such as life policies or unit trusts) so that the underlying assets of the investment portfolio consist of shares in a range of leading international companies. Property Aims to provide investors with a diversified portfolio of property investments offering potential for long term capital growth. Investing either directly in assets or indirectly through collective investments (such as life policies or unit trusts) so that the underlying assets of the investment portfolio provide an exposure to various types of properties throughout Australia such as office blocks, shopping centres and industrial buildings. Neutral position ranges Neutral position ranges Superannuation International shares Cash 0 10 Pension International shares Cash 0 10 Superannuation Property Income-only investments Pension Property Income-only investments

24 Investment Portfolios Westpac Funds Investment objective International Fixed Interest Aims to provide competitive returns from investment in selected major bond markets around the world. Investment strategy Investing either directly in assets or indirectly through collective investments (such as life policies or unit trusts) so that the underlying assets of the investment portfolio consist of short-term money market securities, fixed term debt securities and derivative contracts intended to replicate a fully hedged exposure to international fixed interest markets. mix () The Trustee has set a neutral position and strategic range for each of the investment sectors as shown in the table right. In addition, the table shows the actual asset mix between the underlying sectors at 30 June 2008 and 30 June 2009: Neutral position ranges Superannuation International fixed interest Cash Pension International fixed interest Cash

25 Australian Fixed Interest Aims to provide competitive returns, reflecting those available in the Australian fixed interest market. Investing either directly in assets or indirectly through collective investments (such as life policies or unit trusts) so that the underlying assets of the investment portfolio: > > consist of securities or instruments that include those issued by the Commonwealth Government, Australian State Governments or major/state trading banks and other corporate bodies > > may include investments in other interest-bearing securities such as corporate bonds, mortgages, corporate loans or infrastructure bonds. Cash and Short-term Securities Aims to provide a relatively secure investment in cash and money market securities. To reduce short term capital fluctuations. Investing either directly in assets or indirectly through collective investments (such as life policies or unit trusts) so that the underlying assets of the investment portfolio consist of short term money market investments such as bank deposits, bank-accepted bills and certificates of deposit. Neutral position ranges At 30 June 2008 and 2009 the underlying assets of the Fund consisted fully (100) of Cash investments. Superannuation Australian fixed interest Cash Pension Australian fixed interest Cash

26 Investment Portfolios Westpac Funds Investment objective Investment strategy Australian Sustainability Shares Aims to provide capital growth and some income over the long term from investments in Australian shares, while maximising the sustainability focus of the investment portfolio. Investing either directly in assets or indirectly through collective investments (such as life policies or unit trusts) so that the underlying assets of the investment portfolio invests in shares of Australian companies that demonstrate best-ofsector sustainability performance (as determined by Monash Sustainability Enterprises and us). Investments are diversified across industry sectors and favour companies with a higher sustainability ranking. Lower ranking companies are selected only if needed to manage overall investment risk. Excludes companies which directly mine or use uranium for the purpose of weapons manufacture. mix () The Trustee has set a neutral position and strategic range for each of the investment sectors as shown in the table right. In addition, the table shows the actual asset mix between the underlying sectors at 30 June 2008 and 30 June 2009: Neutral position ranges Superannuation Australian shares Cash Pension Australian shares Cash

27 International Sustainability Shares Aims to provide capital growth and some income over the long term from an investment in international shares, while maximising the sustainability focus of the investment portfolio. Investing either directly in assets or indirectly through collective investments (such as life policies or unit trusts) so that the underlying assets of the investment portfolio invest in shares included (or intended to be included within three months) in the Dow Jones Sustainability World Index (ex Australia). Excluded are companies which directly mine or use uranium for the purpose of weapons manufacture, or that derive more than 50 of their sales from weapons and armaments. Neutral position ranges Superannuation International shares Cash Pension International shares Cash

28 Investment Strategies 1 Diversified managed investment strategies Growth Balanced Conservative Risk Moderate to high risk Moderate to high risk Moderate risk Recommended timeframe Recommended for 5 years or more Recommended for 5 years or more Recommended for 3 years or more Investment strategy To provide investors with growth over rolling 5 year periods through higher exposure to growth assets such as shares and property, with some fixed interest and cash investments. Investment portfolios in this strategy will suit investors who want to grow the value of their investment over the long term and accept that returns over the short term may fluctuate or even be negative. To provide investors with growth over rolling 5 year periods through a balanced exposure to growth assets such as shares and property, and income producing assets such as fixed interest and cash investments. Investment portfolios in this strategy will suit investors who want a balanced exposure to growth and income producing assets and accept that returns over the short term may fluctuate or even be negative. To provide investors primarily with income and also with some growth over rolling 3 year periods through an investment portfolio consisting mainly of fixed interest and cash investments, but which normally will also have some exposure to growth assets such as shares and property. Investment portfolios in this strategy will suit investors who prefer a higher exposure to income producing investments, while having limited exposure to growth investments and accept that returns over the short term may fluctuate or even be negative. Indicative ranges Growth assets Defensive assets Growth assets Defensive assets Growth assets Defensive assets _ The Trustee may add, withdraw, close or change the investment portfolios available at any time.

29 specific investment strategies Australian shares International shares Property securities Australasian fixed interest High risk High risk Moderate to high risk Moderate risk Recommended for 5 years or more Recommended for 5 years or more Recommended for 5 years or more Recommended for 3 years or more To provide investors with significant growth to the value of their investments over rolling 5 year periods primarily through exposure to Australian shares in a variety of market sectors. Investment portfolios in this strategy will suit investors who want to significantly grow the value of their investment over the long term and accept that returns over the short term may fluctuate or even be negative. To provide investors with significant growth to the value of their investments over rolling 5 year periods primarily through exposure to shares from around the world (including Australia), in a variety of countries, geographical regions and industry sectors with no limit on the amount that can be invested in any one country, sector or region. Investment portfolios in this strategy will suit investors who are seeking to invest in international share markets through a managed investment vehicle and who accept a significant chance of a negative return in any one year. To provide investors with income and some growth to the value of their investments over rolling 5 year periods through exposure primarily to property related listed securities in Australia. Investment portfolios in this strategy will suit investors who want mostly income returns while maintaining some growth in the value of their investment over the long term and accept that returns over the short term may fluctuate or even be negative. n/a n/a n/a n/a To provide investors with returns that are above inflation and cash over rolling 3 year periods through exposure to Australian fixed interest securities. Investment portfolios in this strategy will suit investors who want to maintain the value of their investment over the medium term who accept that returns over the short term may fluctuate or even be negative. 29

30 Investment Strategies 1 specific investment strategies International fixed interest Cash Risk Moderate to high risk Low risk Recommended timeframe Recommended for 3 years or more Recommended for 1 year or more Investment strategy To provide investors with returns that are above inflation and cash over rolling 3 year periods through exposure to fixed interest securities from around the world (including Australia) with no limit on the amount that can be invested in any one country or region. Investment portfolios in this strategy will suit investors who want to diversify their investment portfolio whilst aiming to maintain the value of their investment over the medium term and accepting that returns over the short term may fluctuate or even be negative. To provide investors with returns that are above at call bank deposit rates through exposure to a range of short term securities, government and bank backed securities and high quality corporate securities. Investment portfolios in this strategy will suit investors seeking high investment liquidity for short periods with a low risk of capital loss. 30

31 Investment Portfolios Other Fund Managers Investment objective and timeframe BT Wholesale Partner Australian Shares Growth 1 The Fund aims to provide a return (before fees, costs and taxes) that exceeds the S&P/ASX 300 Accumulation Index over the medium term. The suggested investment timeframe is five years or more. BT Wholesale Partner Australian Shares Core 1 The Fund aims to provide a return (before fees, costs and taxes) that exceeds the S&P/ASX300 Accumulation Index over the medium to long term. The suggested investment timeframe is five years or more. Investment strategy 1 The Fund is actively managed and invests primarily in Australian shares with a growth style. The Fund is actively managed and invests primarily in Australian shares without a predetermined growth or value basis mix The strategic range for each of the investment sectors are shown in the table right. In addition, the table shows the actual asset 30 June 2008 and 30 June range Australian shares 2 Cash range Australian shares 2 Cash _ BT has the right to change the investment strategy and benchmark for the Fund without prior notice. BT will advise investors of any significant changes in regular updates. 2_ Australian shares means any shares, units or other securities listed on an Australian stock exchange or issued or guaranteed by an Australian entity. 31

32 Investment Portfolios Other Fund Managers Investment objective and timeframe BT Wholesale Partner Australian Shares Value 1 The Fund aims to provide a return (before fees, costs and taxes) that exceeds the S&P/ASX 300 Accumulation Index over the medium to long term. The suggested investment timeframe is five years or more. BT Wholesale Partner International Shares Growth 1 The Fund aims to provide a return (before fees, costs and taxes) that exceeds the MSCI World ex Australia (Standard) Index (Net Dividends) in AUD (unhedged) over the medium to long term. The suggested investment timeframe is five years or more. Investment strategy 1 The Fund is actively managed and invests primarily in Australian shares with a value style. The Fund is actively managed and seeks what we perceive to be the best investment opportunities within a broad portfolio of international shares excluding Australian shares. Whilst the Fund can invest in any international market that offers attractive opportunities, most investments will be located in the United States, Europe and Japan. The Fund is managed with a growth style. mix The strategic range for each of the investment sectors are shown in the table right. In addition, the table shows the actual asset 30 June 2008 and 30 June range Australian shares 2 Cash International shares range Cash and other _ BT has the right to change the investment strategy and benchmark for the Fund without prior notice. BT will advise investors of any significant changes in regular updates. 2_ Australian shares means any shares, units or other securities listed on an Australian stock exchange or issued or guaranteed by an Australian entity.

33 BT Wholesale Partner International Shares Value 1 The Fund aims to provide a return (before fees, costs and taxes) that exceeds the MSCI World ex Australia (Standard) Index (Net Dividends) in AUD over the medium to long term. The suggested investment timeframe is five years or more. BT Wholesale European Share Fund The Fund aims to provide a return (before fees, costs and taxes) that exceeds the MSCI Europe (Standard) Index (Net Dividends) in AUD over the medium to long term. The suggested investment timeframe is five years or more. BT Wholesale Asian Share Fund The Fund aims to provide a return (before fees, costs and taxes) that exceeds the MSCI AC Asia ex Japan (Standard) Index (Net Dividends) in AUD over the medium to long term. The suggested investment timeframe is five years or more. The Fund is actively managed and seeks what we perceive to be the best investment opportunities within a broad portfolio of international shares excluding Australian shares. Whilst the Fund can invest in any international market that offers attractive opportunities, most investments will be located in the United States, Europe and Japan. The Fund is managed with a value style. range The Fund is actively managed and seeks what we perceive to be the best investment opportunities within Europe. The Fund can invest in any market in the European region that offers attractive opportunities. range The Fund is actively managed and seeks what we perceive to be the best investment opportunities within the Asian region excluding Japan and Australia. The Fund can invest in any market in the Asian region that offers attractive opportunities including Korea, Hong Kong, Taiwan, Singapore, China, Malaysia, Thailand, Indonesia, the Philippines, India and Pakistan. range International shares International shares International shares Cash Cash Cash