FITZPATRICKS MDA RISK TARGETED PORTFOLIOS

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1 FITZPATRICKS MDA RISK TARGETED PORTFOLIOS Monthly Report, August 2016 PERFORMANCE AS AT 31 AUGUST 2016 Performance Volatility Risk Targeted Moderately Conservative Portfolio 1 Month 3 Months 6 Months 1 Year 2 Years 3 Years 5 Years Sharpe Ratio -0.3% -0.2% 1.2% 3.4% 4.5% 5.6% 5.9% 7.6% 3.2% /09/02 Risk Targeted Balanced Portfolio -0.4% -0.8% 1.8% 3.9% 6.9% 7.6% 8.5% 9.5% 4.5% /09/02 Risk Targeted Growth Portfolio -0.4% -0.9% 2.1% 4.0% 7.7% 8.3% 9.4% 10.8% 5.6% /09/02 Risk Targeted High Growth Portfolio -0.4% -0.9% 2.2% 4.1% 8.0% 8.6% 9.6% 12.0% 6.4% /09/02 RBA Cash Rate 0.1% 0.4% 0.9% 1.9% 2.1% 2.2% 2.8% 4.3% 0.4% /09/ Australian Equity and Cash -0.7% 1.3% 7.3% 5.7% 2.7% 4.6% 6.4% 6.9% 6.5% /09/02 Australian Equities -1.6% 2.1% 13.9% 9.3% 2.9% 6.6% 9.7% 9.1% 13.1% /09/02 Australian Small Cap Equities -1.6% 5.5% 19.3% 26.5% 6.9% 7.1% 2.6% 7.1% 17.7% /09/02 Australian Listed Property Trusts -2.7% 6.2% 14.8% 26.0% 20.0% 19.8% 19.5% 6.7% 16.7% /09/02 International Equities ($A) 1.3% -0.6% 6.8% 0.5% 13.2% 13.9% 17.8% 5.8% 11.6% /09/02 International Equities (Local) 0.5% 3.2% 11.4% 6.3% 4.2% 9.5% 12.0% 7.8% 13.6% /09/02 Australian Fixed Interest 0.4% 2.5% 3.8% 6.2% 6.2% 6.5% 6.2% 6.2% 2.7% /09/02 Gold -3.1% 7.7% 5.7% 15.3% 0.9% -2.1% -6.4% 10.6% 18.4% /09/02 Date Financial Express Cautious Financial Express Moderate Financial Express Balanced Financial Express Growth Financial Express Aggressive 0.1% 1.1% 3.6% 3.4% 3.6% 4.3% 5.0% 4.7% 2.6% /09/02 0.2% 1.2% 4.0% 3.8% 3.9% 4.8% 5.7% 5.0% 3.3% /09/02 0.2% 1.3% 5.9% 4.2% 4.5% 6.1% 7.5% 5.5% 5.9% /09/02 0.2% 1.1% 6.6% 3.9% 5.0% 6.9% 8.7% 6.1% 7.3% /09/02 0.4% 1.5% 7.7% 4.8% 5.8% 7.6% 9.5% 6.0% 8.7% /09/02 Source: Fitzpatricks, Iress. Performance from 30 September 2002 to 31 August Performance of Fitzpatricks portfolios is after investment management fees, excludes administration and advice fees and assumes re-investment of all distributions. was 30 September Performance is based on Fitzpatricks model accounts and will differ between the four risk profiles individual client portfolio performance may be different from the results above. Market indices represent performance of; The RBA Cash rate, 50% split between The RBA Cash rate and S&P ASX 200 Accumulation Index, S&P ASX 200 Accumulation Index, S&P ASX Small Ordinaries Accumulation Index, S&P ASX 300 Listed Property Accumulation Index, MSCI World ex-australia net $A and Local Currency, Bloomberg AusBond Composite Bond Index and the US Spot Gold price. Past performance is not a reliable indicator of future performance. 1

2 MARKET COMMENTARY In his final month as head of the Reserve Bank of Australia, RBA governor Glenn Stevens oversaw the reduction to official cash rates by 25 basis points to 1.50 per cent, which came into effect on the 3rd August The Australian share market took this as a signal for overall lower expectant growth and subdued economic conditions ahead with markets falling in August as the S&P/ASX 200 ended the month -1.6 per cent lower. The Insurance and Telecommunications sectors retreated the most, down by -6.6 per cent and -5.2 per cent respectively whilst Utilities (down -5.2 per cent) and Healthcare (down -3.4 per cent) also lost ground. The Information Technology sector added to the previous month s gains by 5.1 per cent, while the energy sector also improved adding on 2.9 per cent for the month. Overall growth in Australia continued at a moderate pace although business investments continued to decline. Labour markets improved slightly in August with the monthly growth rate at 0.1 per cent as part-time employment growth continued to outstrip full time employment growth, a trend that is expected to linger in the near term. Given subdued growth in labour costs and overall lower global cost pressures, inflation continued to remain below the RBA s targeted levels of 2-3 per cent. Similarly U.S markets remained relatively subdued throughout August as markets turned attention towards the Federal Reserve s (The Fed) yearly conference at Jackson Hole Wyoming and Janet Yellen s (the Chair of the Fed) 26th August address. In a speech that underscored the importance of building effective monetary policy foundations, the markets and Wall Street tried to seize on any clues of the future direction of U.S interest rates and the timing of the next rate rise. The speech highlighted that solid growth in household spending was the main driving force behind a restrained but sustained expansion of U.S economic activity. Business investments remained soft over the period, however a consumer led expansion was sufficient to generate improvements in labour markets with job gains (measured by U.S non-farm payrolls) increasing by 151,000 jobs in August. US inflation continued to run below the Fed s targeted band but the expectation of continued moderate growth (measured by real gross domestic product) coupled by strengthening labour markets has gathered momentum for an increase to the federal funds rate. This underlying message and decision on a rates movement has been factored in by markets, with many anticipating at least one hike to official rates by the end of Globally, equity markets remained relatively flat throughout August. The S&P 500 Index posted a flat 0.1 per cent, as Europe ventured slightly higher, the German DAX Index up 2.5 per cent and the UK FTSE Index up 1.7 per cent. The Japanese Topix Index was up 2.5 per cent as were other Asian markets with the Hang Seng up 5.2 per cent and China Shanghai Composite Index up 3.7 per cent. On the commodities front, the sector posted some mixed results as the price of oil increased by 7.5 per cent as measured by WTI Crude, whilst the price of gold fell by -2.7 per cent. The AUD/USD was lower by 0.9 per cent, closing the month at US$

3 PORTFOLIO COMMENTARY The Risk Targeted Diversified Portfolios were lower in August with the expected rate cut providing little more than temporary relief for investor sentiment. International equities advanced overall whilst domestic equities were weaker. Healthcare and Utilities were the main detractors to domestic equities performance as the sectors ended -3.4 per cent and -5.2 per cent lower. Name specific announcements weighed down on performance as did a dour mood following a weak reporting season. Within the international equities space, the Portfolios Asia focused strategy via the Antipodes Global - Long Only Fund again outperformed, delivering a solid return of 5.7 per cent for the month, attributable to strong manager performance as well as benefitting from their exposures to the emerging markets and sizeable China. This was alongside our other mainstream international managers delivering positive results for the month, all contributing to performance on the international equities front. Currency movements proved to be favourable over August as the Australian Dollar (AUD) retreated against the US Dollar (USD) by 0.9 per cent, ending the month at U.S$ The Portfolio s structural long position to the USD remains an investment call backed by sound economic drivers. The Portfolios Alternatives Exposure was down in August amidst mixed performance from various underlying strategies. Both the market neutral and soft commodities strategies were negative for the month with the Bennelong Long Short Equity Fund the laggard. Performance was driven by the Fund s short positions which underperformed the comparative long portion of the book. International market neutral strategies fared better for the month. The GMO Systematic Global Macro Trust proved to be the exception to the alternatives mix in a difficult month with positive performance of 1.0 per cent. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: Fitzpatricks, Iress. Asset allocation as at 31 August PERFORMANCE CHART $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 RTA 5 RTA 7 RTA 9 RTA The Portfolios Fixed Income allocation was stronger for the month returning 0.5 per cent against a cash return of 0.1 per cent. This return was on the back of new all-time lows on the overnight cash rate in Australia as well as markets anticipating rate movements to come out of the US. The Kapstream Absolute Return Income Fund Premier Class returned 0.6 per cent as credit spreads tightened on the back of the RBA s cuts. Fixed Income Source: Fitzpatricks, Iress. Performance from 30 September 2002 to 31 August Performance is after investment management fees, excludes administration and advice fees and assumes re-investment of all distributions. Past performance is not a reliable indicator of future performance. Cash Liquid Alternatives Combined Equity Emerging Markets International Equities Australian Small Caps Australian Equities Risk Targeted Moderately Conservative Portfolio Risk Targeted Balanced Portfolio Risk Targeted Growth Portfolio Risk Targeted High Growth Portfolio RBA Cash Rate 3

4 AS AT 31 AUGUST 2016 PRESERVERS CASH Manager Historical Performance 1 Month % 3 Months % 6 Months % 1 Year % 3 Years % Cash 0.1% 0.4% 0.9% 1.9% 2.2% FIXED INCOME Atrium Enhanced Fixed Income Fund 0.5% 1.2% 2.8% 3.7% GROWTH EQUITIES - AUSTRALIAN Atrium Equity Opportunities Fund -2.7% -0.7% 6.7% 10.0% - Bennelong ex-20 Australian Equity Fund 0.3% 4.0% 14.4% 29.6% 15.3% SG Hiscock ICE Fund -1.9% -1.3% 6.4% 13.6% 15.6% EQUITIES - INTERNATIONAL IFP Global Franchise Fund 0.2% -0.2% 7.8% 7.0% 17.4% Atrium Global Equities Mandate No. 1( Magellan) 1.7% -1.1% 2.7% -0.7% 13.4% Antipodes Global Fund 5.7% 4.0% 12.3% 9.4% Northcape Capital Global Emerging Markets Fund 0.5% 0.2% 5.7% 10.6% 10.6% DIVERSIFIERS ALTERNATIVES Atrium Alternatives Fund -1.6% -0.2% -2.2% 2.8% - Crown Atrium Alternative Investment SPC (USD) 0.0% 0.5% -2.8% - - Bennelong Long Short Equity Fund -5.4% -4.8% -6.9% 9.8% 8.0% Regal Tasman Market Neutral Fund -4.7% -5.8% -4.9% -4.6% 12.7% GMO Systematic Global Macro Trust 1.0% 13.7% 9.9% 11.1% 5.8% Henderson AlphaGen Agricultural LS Strategy -1.6% 2.2% -1.6% 0.1% - Henderson AlphaGen Agricultural RV Strategy -1.6% 1.3% 1.7% 4.1% 3.8% Barwon Albion Investment Trust 1.1% 3.5% 7.0% 14.4% - Barwon Child Care Property Fund 1.3% 4.0% 7.6% - - Barwon Doncaster Development Trust 0.0% 0.0% 1.6% 11.2% - Barwon Woolloomooloo Investment Trust 1.2% 3.5% 7.1% 14.5% - Barwon Healthcare Property Fund 0.1% 0.4% 5.2% 7.6% - Primewest Exchange Tower Trust 0.3% 10.2% 6.8% - - Liquidity 0.1% 0.4% 0.9% 1.9% 2.2% Source: Atrium and External Investment Manager / Administrator websites or reports. Performance to 31 August Performance is after investment management fees, excludes administration and advice fees and assumes re-investment of all distributions. Holdings within the Atrium Alternatives Fund are given on a look through basis, individual clients will not hold these funds directly. Past performance is not a reliable indicator of future performance. Please note: The Atrium Global Equities Mandate No. 1 is managed by Magellan Asset Management Limited in a manner consistent with the management of the Magellan Global Fund. 4

5 For more information please contact your Adviser or Fitzpatricks Private Wealth: SYDNEY Level 5, Challis House 4 Martin Place Sydney NSW 2000 PHONE GPO Box 1193 Sydney NSW 2001 BRISBANE 37a Kennigo Street Spring Hill QLD 4000 PHONE FPW.Operations@ftz.com.au Important Information The information in this document (Information) has been issued by Fitzpatricks Private Wealth Pty Ltd (ABN ), (AFSL ) (Fitzpatricks). The Information is of a general nature only and has been prepared without taking into account your objectives, financial situation or needs. Because of this, we recommend you consider obtaining your own legal, financial or other professional advice before making a decision in relation to any investment. The views expressed are the opinions of the authors at the time of writing and do not constitute a recommendation to act. All information referenced is believed to be accurate at the time of compilation and is provided by Fitzpatricks in good faith. Past performance is not a reliable indicator of future performance. Neither Fitzpatricks nor any other person guarantees or makes any representations as to the future performance of any fund, stock or the return of an investor s capital. When we speak of our investment objectives, particularly for performance, it is very important to understand that these are not forecasts, promises or guarantees. They are simply our goals. You can lose as well as make money. Performance figures relate to the model portfolios offered by Fitzpatricks, with investment management implemented by one or more underlying investment managers selected from time to time and monitored by Fitzpatricks. Underlying investment managers and the details of each model portfolio have changed in the past and will change in the future and you should keep this fluidity in mind when considering figures. Actual performance will differ amongst clients depending on the timing of their investment, the ability of an investor to nominate stocks they do or do not wish to hold and the level of variation from the models. Figures are post portfolio management fees and expenses of Fitzpatricks and underlying managers. They do not take into account inflation or tax or adviser fees and assume reinvestment of distributions. While the Information has been prepared with all reasonable care by Fitzpatricks (with input from its related bodies corporate as required) and derived from sources believed to be reliable, it has not been independently verified and no warranties are given that it is complete, accurate, and up-to-date or fit for the purpose for which it is required. Neither Fitzpatricks nor any party appointed by or associated with any of them assume any responsibility for errors, inaccuracies or omissions in this document. This document is provided for information purposes only and should not be construed as a solicitation or offer to buy or sell any financial instruments; neither should it serve as the sole basis for making an investment decision. 5