31 MARCH 2014 QUARTERLY REPORT FOR EMPLOYERS AND ADVISERS. AMP MySuper. A lifecycle investment solution 1 //

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1 31 MARCH 2014 QUARTERLY REPORT FOR EMPLOYERS AND ADVISERS A lifecycle investment solution 1 //

2 Contents Message from your fund manager s s s s s 12 Capital Stable 14 Currency management 16 AMP s MySuper Portfolio Management Team 17 Contents

3 Message from your fund manager Welcome to the inaugural quarterly report for AMP s MySuper lifecycle solution. Last year was a big year for AMP. On 1 January we launched six new investment options as part of our lifecycle solution. MySuper is an important part of the Government s Stronger Super changes and provides low cost investment options for members who haven t actively made an investment choice. AMP s Lifecycle options are simple in their design and provide members with an investment approach that takes them all the way through their superannuation savings journey to their retirement. The Lifecycle options have had a strong start, with positive performance across all options and good inflows in their first quarter. We ve seen $450 million flow into the options in their first three months. So far this year we ve seen a more muted tone to global market performance compared to Equity markets had a soft start with global equities outpaced by bonds. This softness was compounded for Australian dollar domiciled investors as the currency rose which further eroded returns from unhedged overseas investments. Emerging market turbulence, softer Chinese economic data and the US Federal Reserve s tapering of its bond purchasing program destabilised markets early on, but markets were boosted later in the quarter by positive US economic data. For the more growth-oriented Lifecycle options (1990s, 1980s, 1970s and 1960s), Australian equities made the largest contribution to total return, benefitting from a strong Australian corporate reporting season and outpacing the other major equity markets. The allocation to global listed property also added value as investors tended to favour more defensive sectors. For the more defensive Lifecycle options (1950s and Capital Stable), income-focused asset classes like global listed infrastructure and property made the largest contributions to total return with global and Australian property markets outperforming other asset classes over the quarter. The broad trend for equity market performance is likely to remain positive reflecting reasonable valuations, better earnings and easy monetary conditions. The Lifecycle options are well positioned to take advantage of these conditions. We still prefer global equities to Australian, on valuation grounds, and we continue to hold underweight positions in sovereign bonds, particularly international. A slow rising trend in bond yields on the back of improving global growth, combined with low yields to start with, means that we continue to expect subdued returns from bonds. We look forward to keeping you updated on the Lifecycle options as they develop over the coming year. Thank you for your continued support. Debbie Alliston, CFA Chief Investment Officer Corporate Super AMP Capital AMP MySUPER 3 //

4 1990s 100% % of growth Assests GROWTH DEFENSIVE Age (years)

5 VERY LOW LOW LOW TO MEDIUM MEDIUM MED TO HIGH HIGH VERY HIGH 5 STANDARD RISK MEASURE Risk reward spectrum 1990s Fund Summary INVESTMENT AIM AND STRATEGY To provide returns primarily from capital growth with some income over the long-term through a diversified portfolio. Initially, this investment will hold a higher allocation to growth assets. As the investor approaches retirement, the investment option will progressively shift with the aim of preserving capital through a higher allocation to defensive assets. The asset allocation is determined with reference to the investment option s stage of its lifecycle the time horizon to retirement and the investors capacity to take on risk. TARGET INVESTMENT MIX AS AT 31 MARCH % Australian equities 27% International equities 9% Cash 6% Emerging market equities 6% Listed property 5% High yield credit 5% Absolute return growth 4% Australian bonds 2% Listed infrastructure 0% Direct property 0% Direct infrastructure 0% Private equity 0% International bonds 0% Absolute return defensive Fund objective As at 1 January 2014, 1990s aims to achieve an average rate of return above the Consumer Price Index of 5.0 per cent per annum, after fees and superannuation tax, over a 10 year period. INVESTOR PROFILE > The strategy of this investment option will change progressively over an investor s lifetime to meet the objective of the average investor born during the 1990s > Standard risk measure: 5/Medium to High > Suggested minimum investment timeframe: 10 years PORTFOLIO COMPOSITION 1990s provides investors with an age-appropiate investment mix with a current target allocation of: > 95% growth assets and 5% defensive assets PERFORMANCE 1990s returned +1.1% for the March quarter. MARCH 2014 PERFORMANCE HIGHLIGHTS This reflected softer asset class returns compared to the strong run in markets at the end of last year, particularly equities. With the largest weight in the Fund, Australian equities made the most significant contribution to performance for the quarter. The local market pushed higher over the three months, helped by a decent reporting season in February. The allocation to global listed property also added value as share market investors tended to favour more defensive sectors. The off-benchmark allocation to listed infrastructure was similarly positive, albeit to a lesser extent. The notable negative in the March quarter was international equities both developed and emerging. These sectors detracted from overall performance, primarily as a result of currency effects with the Australian dollar gaining around +3% over the period. PERFORMANCE SINCE INCEPTION 1.1% Option 1.8% CPI target Inception date is 1 January Performance is after fees and superannuation tax. AMP MySUPER 5 //

6 1980s 100% % of growth Assests GROWTH DEFENSIVE Age (years)

7 VERY LOW LOW LOW TO MEDIUM MEDIUM MED TO HIGH HIGH VERY HIGH 5 STANDARD RISK MEASURE Risk reward spectrum 1980s Fund Summary INVESTMENT AIM AND STRATEGY The aim of this investment option is to provide returns primarily from capital growth with some income over the long-term through a diversified portfolio. Initially, this investment will hold a higher allocation to growth assets. As the investor approaches retirement, the investment option will progressively shift with the aim of preserving capital through a higher allocation to defensive assets. The asset allocation is determined with reference to the investment option s stage of its lifecycle the time horizon to retirement and the investors capacity to take on risk. TARGET INVESTMENT MIX AS AT 31 MARCH % Australian equities 27% International equities 9% Cash 6% Emerging market equities 6% Listed property 5% High yield credit 5% Absolute return growth 4% Australian bonds 2% Listed infrastructure 0% Direct property 0% Direct infrastructure 0% Private equity 0% International bonds 0% Absolute return defensive Fund objective As at 1 January 2014, 1980s aims to achieve an average rate of return above the Consumer Price Index of 5.0 per cent per annum, after fees and superannuation tax, over a 10 year period. INVESTOR PROFILE > The strategy of this investment option will change progressively over an investor s lifetime to meet the objective of the average investor born during the 1980s > Standard risk measure: 5/Medium to High > Suggested minimum investment timeframe: 10 years PORTFOLIO COMPOSITION 1980s provides investors with an age-appropiate investment mix with a current target allocation of: > 95% growth assets and 5% defensive assets PERFORMANCE 1980s returned +1.3% for the March quarter. MARCH 2014 QUARTER HIGHLIGHTS This reflected softer asset class returns compared to the strong run in markets at the end of last year, particularly equities. With the largest weight in the Fund, Australian equities made the most significant contribution to performance for the quarter. The local market pushed higher over the three months, helped by a decent reporting season in February. The allocation to global listed property also added value as share market investors tended to favour more defensive sectors. The off-benchmark allocation to listed infrastructure was similarly positive, albeit to a lesser extent. The notable negative in the March quarter was international equities both developed and emerging. These sectors detracted from overall performance, primarily as a result of currency effects with the Australian dollar gaining around +3% over the period. PERFORMANCE SINCE INCEPTION 1.3% Option 1.8% CPI target Inception date is 1 January Performance is after fees and superannuation tax. AMP MySUPER 7 //

8 1970s 100% % of growth Assests GROWTH DEFENSIVE Age (years)

9 VERY LOW LOW LOW TO MEDIUM MEDIUM MED TO HIGH HIGH VERY HIGH 5 STANDARD RISK MEASURE Risk reward spectrum 1970s Fund Summary INVESTMENT AIM AND STRATEGY The aim of this investment option is to provide returns primarily from capital growth with some income over the long-term through a diversified portfolio. Initially, this investment will hold a higher allocation to growth assets. As the investor approaches retirement, the investment option will progressively shift with the aim of preserving capital through a higher allocation to defensive assets. The asset allocation is determined with reference to the investment option s stage of its lifecycle the time horizon to retirement and the investors capacity to take on risk. TARGET INVESTMENT MIX AS AT 31 MARCH % Australian equities 26% International equities 9% Cash 7% Listed property 6% Emerging market equities 5% High yield credit 5% Australian bonds 4% Absolute return growth 2% Listed infrastructure 2% Direct property 0% Direct infrastructure 0% Private equity 0% International bonds 0% Absolute return defensive Fund objective As at 1 January 2014, 1970s aims to achieve an average rate of return above the Consumer Price Index of 4.5 per cent per annum, after fees and superannuation tax, over a 10 year period. INVESTOR PROFILE > The strategy of this investment option will change progressively over an investor s lifetime to meet the objective of the average investor born during the 1970s. > Standard risk measure: 5/Medium to High > Suggested minimum investment timeframe: 10 years PORTFOLIO COMPOSITION 1970s provides investors with an age-appropiate investment mix with a current target allocation of: > 91% growth assets and 9% defensive assets PERFORMANCE 1970s returned +1.2% for the March quarter, reflecting softer asset class returns following the strong run in markets at the end of last year. MARCH 2014 QUARTER HIGHLIGHTS Australian equities made the most significant contribution to Fund performance for the quarter, contributing about 60% of the total return. The local market pushed higher over the three months, helped by a decent reporting season in February. The allocation to global listed property also added value as share market investors tended to favour more defensive sectors. The off-benchmark allocation to listed infrastructure was similarly positive, albeit to a lesser extent. The notable negative in the March quarter was international equities both developed and emerging. These sectors detracted from overall performance, primarily as a result of currency effects with the Australian dollar gaining around +3% over the period. PERFORMANCE SINCE INCEPTION 1.2% Option 1.7% CPI target Inception date is 1 January Performance is after fees and superannuation tax. AMP MySUPER 9 //

10 1960s 100% % of growth Assests GROWTH DEFENSIVE Age (years)

11 4 VERY LOW LOW LOW TO MEDIUM MEDIUM MED TO HIGH HIGH VERY HIGH STANDARD RISK MEASURE Risk reward spectrum 1960s Fund Summary INVESTMENT AIM AND STRATEGY The aim of this investment option is to provide returns primarily from capital growth with some income over the long-term through a diversified portfolio. Initially, this investment will hold a higher allocation to growth assets. As the investor approaches retirement, the investment option will progressively shift with the aim of preserving capital through a higher allocation to defensive assets. The asset allocation is determined with reference to the investment option s stage of its lifecycle the time horizon to retirement and the investors capacity to take on risk. TARGET INVESTMENT MIX AS AT 31 MARCH % Australian equities 19% Cash 17% International equities 15% Australian bonds 8% International bonds 6% Listed property 3% High yield credit 3% Absolute return growth 3% Emerging market equities 2% Direct property 2% Listed infrastructure 0% Private equity 0% Direct infrastructure 0% Absolute return defensive Fund objective As at 1 January 2014, 1960s aims to achieve an average rate of return above the Consumer Price Index of 3.0 per cent per annum, after fees and superannuation tax, over a 10 year period. INVESTOR PROFILE > The strategy of this investment option will change progressively over an investor s lifetime to meet the objective of the average investor born during the 1960s > Standard risk measure: 4/Medium > Suggested minimum investment timeframe: 10 years PORTFOLIO COMPOSITION 1960s provides investors with an age-appropiate investment mix with a current target allocation of: > 61% growth assets and 39% defensive assets PERFORMANCE 1960s returned +1.2% for the March quarter, reflecting softer asset class returns following the strong run in markets at the end of last year. MARCH 2014 QUARTER HIGHLIGHTS Australian equities made the most significant contribution to Fund performance for the quarter, contributing about 35% of the total return. The local market pushed higher over the three months, helped by a decent reporting season in February. The allocation to global listed property also added value as share market investors tended to favour more defensive sectors. The off-benchmark allocation to listed infrastructure was similarly positive, albeit to a lesser extent. The notable negative in the March quarter was international equities both developed and emerging. These sectors dragged on overall performance, primarily as a result of currency effects with the Australian dollar gaining around +3% over the period. The Fund s positions in fixed income and cash were positive and helped to offset the falls in unhedged international equities. The Fund s bond holdings performed well over the March quarter government yields both domestically and globally tended to fall as market volatility picked up, while credit spreads continued to tighten. PERFORMANCE SINCE INCEPTION 1.2% Option 1.3% CPI target Inception date is 1 January Performance is after fees and superannuation tax. AMP MySUPER 11 //

12 1950s 100% % of growth Assests GROWTH DEFENSIVE Age (years)

13 4 VERY LOW LOW LOW TO MEDIUM MEDIUM MED TO HIGH HIGH VERY HIGH STANDARD RISK MEASURE Risk reward spectrum 1950s Fund Summary INVESTMENT AIM AND STRATEGY The aim of this investment option is to provide returns primarily from capital growth and income over the long-term through a diversified portfolio. This investment will hold a higher allocation to defensive assets, with capital preservation a focus. The asset allocation is determined with reference to the investment option s stage of its lifecycle the time horizon to retirement and the investors capacity to take on risk. TARGET INVESTMENT MIX AS AT 31 MARCH % Cash 18% Australian bonds 17% Australian equities 13% International bonds 11% International equities 5% Listed infrastructure 5% Listed property 3% Absolute return defensive 2% Emerging market equities 2% Absolute return growth 2% High yield credit 0% Private equity 0% Direct infrastructure 0% Direct property Fund objective As at 1 January 2014, 1950s aims to achieve an average rate of return above the Consumer Price Index of 2.5 per cent per annum, after fees and superannuation tax, over the relevant time period. INVESTOR PROFILE > The strategy of this investment option will change progressively over an investor s lifetime to meet the objective of the average investor born during the 1950s > Standard risk measure: 4/Medium > Suggested minimum investment timeframe: Under 5 years PORTFOLIO COMPOSITION 1950s provides investors with an age-appropiate investment mix with a current target allocation of: > 45% growth assets and 55% defensive assets PERFORMANCE 1950s returned +1.3% for the March quarter, a solid result given the softer asset class returns following the strong run in markets at the end of last year. MARCH 2014 PERFORMANCE HIGHLIGHTS The most significant contributor to overall performance was the Fund s holdings of income-focused equities, including global listed infrastructure and property. These assets appeared to return to favour as investors sought the relative stability of yield-driven equities in a more uncertain market environment. These assets are also fully hedged to the Australian dollar, which was advantageous given the strong rise in the local currency. Also positive was the Fund s Australian equities position with the local market grinding higher over the quarter, helped by a decent reporting season mid-way through the period. In contrast, the Fund s international equities holdings dragged on overall performance, primarily as a result of currency effects with the Australian dollar gaining around +3% over the period. One of the Fund s largest exposures is fixed income. This position performed well for the Fund over the March quarter government yields both domestically and globally tended to fall as market volatility picked up. PERFORMANCE SINCE INCEPTION 1.3% Option 1.2% CPI target Inception date is 1 January Performance is after fees and superannuation tax. AMP MySUPER 13 //

14 Capital Stable 100% % of growth Assests GROWTH DEFENSIVE Age (years)

15 3 VERY LOW LOW LOW TO MEDIUM MEDIUM MED TO HIGH HIGH VERY HIGH STANDARD RISK MEASURE Risk reward spectrum CAPITAL STABLE Fund Summary INVESTMENT AIM AND STRATEGY The aim of this investment option is to provide returns primarily from income. This investment option will hold a high allocation to defensive assets, with capital preservation a priority. The option has a relatively high allocation towards fixed interest with a focus on yield producing assets to provide greater return stability. The alternatives allocation also targets income generating assets. The assest allocation is determined with reference to the investment options stage of it s lifecycle - the time horizon to retirement and the investors capacity to take on risk. TARGET INVESTMENT MIX AS AT 31 MARCH % Cash 20% Australian bonds 14% Australian equities 14% International bonds 9% International equities 5% Listed property 5% Listed infrastructure 3% Absolute return defensive 2% Emerging market equities 2% High yield credit 2% Absolute return growth 0% Private equity 0% Direct infrastructure 0% Direct property Fund objective As at 1 January 2014, Capital Stable aims to achieve an average rate of return above the Consumer Price Index of 2.0 per cent per annum, after fees and superannuation tax, over the relevant time period. INVESTOR PROFILE The strategy of this investment option will change progressively over an investor s lifetime to meet the objective of the average investor born prior to the 1950s. > Standard risk measure: 3/Low to Medium > Suggested minimum investment timeframe: No minimum PORTFOLIO COMPOSITION Capital Stable provides investors with a greater exposure to fixed interest assets - appropriate for yield and returns stability. The current target allocation is: > 40% growth assets and 60% defensive assets PERFORMANCE Capital Stable returned 1.3% for the March quarter, a solid result given the softer asset class returns following the strong run in markets at the end of last year. MARCH 2014 QUARTER HIGHLIGHTS The most significant contributor to overall performance was the Fund s holdings of income-focused equities, including global listed infrastructure and property. These assets appeared to return to favour as investors sought the relative stability of yield-driven equities in a more uncertain market environment. These assets are also fully hedged to the Australian dollar, which was advantageous given the strong rise in the local currency. Also positive was the Fund s Australian equities position with the local market grinding higher over the quarter, helped by a decent reporting season mid-way through the period. In contrast, the Fund s international equities holdings dragged on overall performance, primarily as a result of currency effects with the Australian dollar gaining around +3% over the period. One of the Fund s largest exposures is fixed income. This position performed well for the Fund over the March quarter government yields both domestically and globally tended to fall as market volatility picked up. PERFORMANCE SINCE INCEPTION 1.3% Option 1.1% CPI target Inception date is 1 January Performance is after fees and superannuation tax. AMP MySUPER 15 //

16 Currency management

17 Currency management Our currency positioning is actively managed, monitored and reported at the fund level. Each of the lifecycle funds has a neutral position to foreign currency exposure with ranges around this neutral position that permit the portfolio manager to take active positions based on our dynamic asset allocation model. The neutral exposure to foreign currency for each lifecycle option is shown below. Lifecycle Option Neutral exposure to foreign currency (% of total fund) 1990s 24% 1980s 24% 1970s 23% 1960s 15% 1950s 9% Capital Stable 7% AMP MySUPER 17 //

18 Who manages the range of solutions? AMP Capital s purpose is to help clients by seeking to provide outstanding investment outcomes. This means performance balanced by risk management, giving you confidence that AMP Capital is committed to helping clients meet their goal. AMP Capital is a leading investment house with over $142 billon 1 in funds under management. We have a heritage and strength in real estate and infrastructure, and specialist expertise in fixed income, equities and multi-asset solutions. Our experience and leadership across asset classes not only provides insights into everchanging markets, but also means we are at the forefront of developing contemporary investment solutions for clients. Our process is designed to deliver outstanding investment outcomes for clients. We are as focused on risk management as we are on opportunities. Investment decisions are based on rigorous and repeatable research and modelling, leveraging the depth of investment knowledge across AMP Capital. We believe better outcomes start with a deep understanding of clients needs. Our culture of collaboration drives our people to share insights and to innovate. This way of working, combined with AMP Capital s expertise across asset classes, means clients benefit from deeper insights and stronger investment solutions. 1 As at 31 March 2014, in Australian dollars

19 Meet the Portfolio Management Team The MySuper Portfolio Management Team sits within AMP Capital s Multi-Asset Group. The Multi-Asset Group is one of Australia s most experienced multi-asset and diversified investment managers. The Portfolio Management team has overall responsibility for the investment performance of the full range of diversified portfolios, which covers both market-linked and goal based funds. The team set the strategic/neutral asset allocation and implement dynamic asset allocation decisions in conjunction with our Investment Strategy & Economics Team. The team also manage currency exposure, cash flow, liquidity, fee budgets and risk management of our diversified funds. Debbie Alliston is the Head of Multi-Asset Portfolio Management at AMP Capital and the Chief Investment Officer Corporate Super. Debbie is responsible for overseeing the Group s specialised portfolio management capability. This capability includes the management of AMP Capital s full range of diversified portfolios including the AMP MySuper range, Future Directions diversified funds, AMP Diversified Options and Responsible Investment Leaders. Debbie s prior roles include Investment Director at Apostle Asset Management and roles at BT Investment Management including Head of Investments, Chief Operating Officer Investment Management and Director Head of Portfolio Management. Sally Boone is a senior member of the MySuper portfolio management team and is also responsible for the portfolio management of the Responsible Investment Leaders suite of diversified funds. Sally joined AMP Capital in Prior to joining AMP Capital, Sally worked at JANA Investment Advisors, where she held a dual role in investment research and client advisory services. Sally has considerable experience within both of these fields, including a role as account manager of Margin Lending at Macquarie Bank. Matthew Hopkins is a senior member of the MySuper portfolio management team and the Senior Portfolio Manager for the AMP Capital Multi-Asset Fund. Matthew began his career with AMP Capital in He has held various positions at AMP including as a Portfolio Manager in global hedge funds and as Divisional Director of Investment Risk (Research and Strategy, Henderson Global Investors, London).

20 AMP Capital Investors Limited (ABN ) (AFSL ) (AMP Capital) has been appointed as the investment manager for each of the Funds, which can be accessed by investing in certain superannuation products issued by AMP Superannuation Limited (ABN ) (AFSL ) (ASL) or NM Superannuation Pty Limited (ABN ) (NM Super). Further information about the Funds can be found in the product disclosure statement (PDS) for the relevant superannuation product issued by ASL or NM Super. The PDS contains important information about the relevant superannuation product and the AMP MySuper Funds and it is important investors read the PDS before making a decision about whether to acquire, continue to hold or dispose of the superannuation product (including decisions whether to invest in the Funds through the superannuation product). Neither AMP Capital, ASL, NM Super, nor any other company in the AMP Group guarantees the repayment of capital or the performance of any financial product or any particular rate of return. Past performance is not a reliable indicator of future performance. While every care has been taken in the preparation of this presentation, AMP Capital makes no representation or warranty as to the accuracy or completeness of any statement in this presentation including without limitation any forecasts. This presentation has been prepared for the purpose of providing general information, without taking account of any particular investor s objectives, financial situation, or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this presentation, and seek professional advice, having regard to the investor s objectives, financial situation, and needs. This presentation is solely for the use of the party to whom it is provided.