DISCLAIMER: The following material was presented at ASX Investor Hour.

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1 ASX Investor Hour DISCLAIMER: The following material was presented at ASX Investor Hour. The views, opinions or recommendations of the presenter are solely those of the presenter and do not in any way reflect the views, opinions, recommendations, of ASX Limited ABN and its related bodies corporate ( ASX ). ASX makes no representation or warranty with respect to the accuracy, completeness or currency of the content. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian financial services licensee before making investment decisions. To the extent permitted by law, ASX and its employees, officers and contractors shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided or omitted or from any one acting or refraining to act in reliance on this information. Presenter: Julia Lee, Equities Analyst, Bell Direct Topic: Investing in turbulent times Date: 2 November 2011 Location: Melbourne Investor Hour

2 Investing in times of turbulence Julia Lee Equities Analyst

3 Disclaimer The information in this presentation is of a general education nature only. It does not take into account the investment objectives, financial situation or needs of any individual investor. Before making an investment decision we recommend that you consult a professional advisor. The Bell Direct service is provided by Third Party Platform Pty Limited trading as Bell Direct (ABN ) an Australian Financial Services licensee (AFSL314341) and a Participant of the ASX Limited Group. 3

4 Performance in last 52 weeks Month 3 months Annual Shanghai 4.8% -8.5% -17.0% Comp ASX % -2.9% -7.8% Nikkei % -8.0% -1.7% S&P % -0.6% 8.6% Dow Jones 12.1% 0.7% 9.2% NASDAQ 13.3% -0.7% 10.0% 4 Source: IRESS, 31 October 2011

5 Quote of the day Markets can stay irrational longer than you can stay solvent. -John Maynard Keynes 5

6 What is a bear market * Change from general optimism to pessimism Euphoria Excitement Optimism Thrill Anxiety Denial Fear Desperation Optimism Relief Panic Hope Depressio Despondency n * Technically a fall of more than 20% from peak 6

7 Secular vs Cyclical bear market Secular bear market once in a generation Primary trend Cyclical bear market happens regularly Secondary trend 7

8 Japan s secular bear market 8 Source: IRESS, Nikkei quarterly price chart, , 26 October 2011

9 Australian market Source: IRESS, XAO quarterly price chart, , 22 Sept 2011

10 Secular bear market (1974) 10 Source: IRESS, XAO quarterly price chart, , 22 Sept 2011

11 Defensive strategies * Sector rotation * High yielding stocks * Corporate bonds 11

12 11 April 9 August Source: IRESS, XJO daily price chart, 11 April 9 August 2011

13 11 April 9 August 2011 WORST BEST Energy -27% Telecom -1% Discretionary - 22% Utilities -6% Materials -21% Staples -11% 13 Source: IRESS, XJO daily price chart, 11 April 9 August 2011

14 4 October 28 October Source: IRESS, XJO daily price chart, 4 October 28 October 2011

15 4 October 28 October 2011 WORST BEST Healthcare +2.5% Financials +17% Telecom +3.3% Energy +17% Staples +3.5% Materials up 14% 15 Source: IRESS, XJO daily price chart, 4 October 28 October 2011

16 11 April 28 October Source: IRESS, XJO daily price chart, 11 April 28 October 2011

17 11 April 28 October 2011 Defensive + growth = Avg. +9% Market down 12% 17 Source: IRESS, XJO daily price chart, 11 April 28 October 2011

18 Identifying turning points Moving average: long term 200 day Overlap generates buy/sell signal Works well in trending market Whip-lashing in sideways market 18

19 Moving averages ASX Source: IRESS, XJO, 18 May 2011

20 Defensive high yields Stable, income from portfolio Buffer against bear markets Tax advantages: franking credits 20

21 Stability Large established businesses Return on equity Low levels of debt Great track record 21

22 Sustainability Dividend payout ratio Increasing earnings Past dividend history 22

23 Sectors Sector Yield Sector Yield Telecom 8.7% Staples 4.8% Utilities 6.8% Industrials 3.7% Financials 7.1% Healthcare 2.7% Property 6.5% Energy 2.6% Consumer Discretionary 5.7% Materials 2.5% 23 Source: IRESS 30 September 2011

24 Payout Sector Payout Sector Yield TLS 107% WOW 71% AGK 64% BXB 78% CBA 73% CSL 46% WDC 84% WPL 57% NWS 15% BHP 26% 24 Source: Bell Direct website

25 Valuations are crucial for performance 25 Source: IRESS, PERXAO

26 Looking at yields 26 Source: IRESS, DYXAO, 17 Aug 2011

27 Making it easy with ETF s - Simple, liquid & flexible - Low fees compared to managed funds - Trade near or at net asset value - Backed by physical assets 27

28 SYI SPDR MSCI Select High Div Yield Fund 28 Source:

29 IHD - ishares S&P/ASX High Dividend 29 Source:

30 RDV Russell High Dividend ETF + 1% from around 50 blue chip Australian shares 30 Source: Bell Potter Exchange Traded Funds report, Feb 2011

31 Growing demand for corporate bonds ANZ CPS3: Increased from $750m to $1.34b WOW Notes II: Increased from $500m to $700m 31

32 Convertible notes * Debt & equity features * Evaluate risk * Higher yield, higher risk 32

33 Listed debt securities 33 Source: Bell Potter Fixed Interest Weekly: 28 October 2011

34 Primary Heathcare Bonds PRYHB $ % gross yield to maturity Margin high 400bp Medium risk Maturity reset Sept-15 Quarterly dividend $

35 Growth strategies * Sector rotation * High growth stocks * High gearing 35

36 Investing in times of turbulence Julia Lee Equities Analyst

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