Commonwealth Securities Limited ABN Wednesday, 4 July 2012

Transcription

1 Level 11, 385 Bourke St, Melbourne, VIC, 3000 Level 14, 363 George St, Sydney, NSW, 2000 Commonwealth Securities Limited ABN Wednesday, 4 July 2012 Timothy Sparks Senior Financial Planner CommSec Wholesale Advisory Level 43, 225 George Street Sydney NSW 2000 timothy.sparks@blackrock.com Dear, Timothy Re: Exchange Traded Funds Portfolio Reference : Further to your request, I have enclosed the CommSec Wholesale Advisory Exchange Traded Funds Portfolio Report for your client. This report takes into account all of the information that you have provided to us, in the request form (this is not a personal profile), on behalf of your client. It is important that you ensure that all information contained within this report is correct prior to it being incorporated into your client s financial plan. CommSec Wholesale Advisory recommends that your clients portfolios, as a minimum, be reviewed semi-annually. This Exchange Traded Funds Portfolio Report must not be made available to retail clients, and is only intended for use by you and CommSec Wholesale Advisory. This advice has been prepared for Financial Planners and is designed to assist you in the preparation of financial advice. It should never be used on a standalone basis. Yours sincerely, Peter Truong CommSec Wholesale Advisory Manager CommSec Advisory, a division of Commonwealth Securities Limited AFSL commsecwholesale@cba.com.au Phone: (03) Fax: (03)

2 Exchange Traded Fund Portfolio Report for ETF Portfolio Recommendation Wednesday, 4 July 2012 Portfolio Constructed for Timothy Sparks Senior Financial Planner CommSec Wholesale Advisory Level 43, 225 George Street Sydney NSW 2000 Phone : timothy.sparks@blackrock.com This Report has been prepared by CommSec Wholesale Advisory which is the wholesale advisory arm of Commonwealth Securities Limited ABN AFSL (CommSec). CommSec is a wholly owned but not guaranteed subsidiary of Commonwealth Bank of Australia ABN AFSL , and a Participant of the ASX Group.

3 Commentary Exchange Traded Fund Portfolio for 4 July 2012 This Exchange Traded Funds Portfolio Report is only intended for the use of Financial Planners and must in no circumstances be made available to any retail clients. Portfolio Review Methodology CommSec Wholesale Advisory adopts a quantitative and qualitative approach to ETF portfolio selection. CommSec Wholesale Investment Adviser combine the Exchange Traded Fund Request Form together with an understanding of individual Exchange Traded Fund and economic conditions to determine a suitable exchange traded funds portfolio. CommSec Wholesale Investment Adviser will endeavour to discuss the construction and Exchange Traded Funds portfolio recommendations with the Financial Planner. Client Background The ETF portfolio recommendations have been made based on the following information: You have requested a focus is on region exposure. You have express the regional exposures to be in the following preferences, Asian Region, Americas, European Region and Africa / Middle East. Recommendation Commentary By chosing a profile no. 3, the focus is on region exposure within the exchange traded fund recommendation. An investor with an international profile of 3, our focus is to provide diversification by applying, 35% in 1 global ETF, 35% in 1 regional and 30% in a country specific ETF. You have requested regional preferences in the following order, Asian Region, Americas, European Region and Africa / Middle East. We have recommended you buy the following Exchange Traded Funds, IOO, IAA & VTS. This will provide a broad exposure across different international regional types and ensures that the portfolio is invested in high quality asset providers that have a good track record in the industry. We have selected the IAA ETF in order to provide a strong weighting towards the Asian region, as per your request. VTS has been included as it is a relatively low cost ETF that has a broad coverage of the overall US market. There are risks with investing in ETF's that include but are not limited to currency, counter party, sovereign, mangement, market, liquidity risk and securities lending. Synthetic ETFs have not been considered because it involves the use of either swaps, derivatives and/or some form of swap enhancements to achieve the necessary index base benchmarking. Due to the lack of knowledge by Dealer Groups and Financial Planners, we are reluctant to enter Synthetic ETFs because the structure and complexity of the product is not transparent. Synthetic ETFs are usually identified with the word Synthetic in its title. For example, QFN Betashares S&P/ASX 200 Financial Sector Etf(Synthetics). Currently, there is only one or two synthetic ETFs available in the market place.

4 Commentary Exchange Traded Fund Portfolio for 4 July 2012 Currency Risk where ETFs are denominated in a foreign country. As the AUD vs the dominated currency fluctuates according to their economic performance it could cause differences in pricing of ETFs. Please note, we have not taken into consideration any foreign exchange or any other related hedgeing stratagies whilst constructing the Exchange Traded Funds Portfolio. Counter Party Risk - Should the issuer enter into an agreement with a third party, there is the risk that the third party may default on their contractual obligations and therefore become a risk to the Exchange Traded Fund. Counter Party risk can be anyone involved in hedging, market makers to synthetic SWAP contracts to compensate for tracking errors. Sovereign Risk When ETFs are exposed to specific countries or region, the performance of these funds are subject to the events that occur in these regions or country. These events can vary from natural events, such as earthquakes, civil unrest and specific economic performance of the country or region. Management Risk ETFs are provided and created by the financial institutions. There are risks associated with the management of the financial Institutions relating to experience strategy, performance and financial resources. Market Risk Relates to the specifics of that particular market such as special events, specific performances to that market. For example, the recent earthquake in Japan affected the Japanese market more than global markets. Liquidity Risk The growth of ETFs have been significant in the last 2 years. However, despite the increased interest and activities, there is still a lack of liquidity when you trade because the market maker can place a higher premium than necessary. As there is little liquidity, large orders may need the involvement of market makers to ascertain a better price. It is similar to when you liquidate a position and there are not enough buyers, your order will not be filled immediately with or without the market maker. Securities Lending - means that the underlying ETF issuer is involved in lending the securities it holds to other counter parties, which is then returned to them at a later date and/or as cash. This is not a synthetic or derivatives driven product. You should refer to the disclosure document (PDS or Prospectus) provided by the issuer for details of all relevant risks.

5 ETF Recommendation Report ETF Report for for Brokerage Min ($) $55.00 Max % 0.005% Current Holding Target Portfolio Action Required Code ETF Price Morning Star Rec Units Value Units Value Action Units Brokerage IOO ishares S&P Global 100 (AU) $57.75 Recommended 0 $0 909 $52,500 BUY 909 $55.00 IAA ishares S&P Asia 50 (AU) $40.67 Recommended 0 $0 1,291 $52,500 BUY 1,291 $55.00 VTS Vanguard US Total Market Shares (AU) ETF $64.61 Recommended 0 $0 696 $45,000 BUY 696 $55.00 Total $0 Total $150,000 Brokerage $165

6 Analysis of New ETF Portfolio ETF Report for Code Exchange Traded Fund Price Morning Star Rec Management Expense Ratio MER Total Cost (%) ETF Total Return 1 YR (%) Units Value Weighting IOO ishares S&P Global 100 (AU) $57.75 Recommended 0.40% $ % 909 $52, % IAA ishares S&P Asia 50 (AU) $40.67 Recommended 0.50% $ % 1,291 $52, % VTS Vanguard US Total Market Shares (AU) ETF $64.61 Recommended 0.07% $ % 696 $44, % 3 Exchange Traded Funds Securities Total MER/Cost (%) 0.336% $ Total $149, % Highly Recommended Recommended Investment Grade Inferior Avoid These represent Morningstar Analysts highest conviction picks. Morningstar award this rating to ETF s that it believes are of the highest quality and have strong investment merit. To earn this rating an ETF must be significantly better than its peers in most key respects. Believes ETFs are above average and have key advantages over competitors and while these are worthy funds, analysts don t see them as the very best. Morningstar Analysts do not have a high degree of conviction and they don t stand out relative to peers but should get the job done. ETFs are thought to be deficient relative to their peers in many key respects. ETF lacks a strong investment case or are inherently too risky or are managed/implemented poorly. Morningstar analysts believe there is a severe structural defect at the parent organisation or the ETF which makes these offerings extremely poor investments. * Data source obtained from Morningstar Research. Information and data can be varified by the attached Morningstar report.

7 ETF Portfolio Sectorial Exposure ETF Report for Sectors Exposure Total ETF Portfolio Industry (%) Cyclical 33.49% Sensitive Basic Materials 4.36% Consumer Cyclical 8.99% Financial Services 17.79% Real Estate 2.35% 46.07% Communication Services 5.96% Energy 12.11% Industrial 8.23% Technology 19.78% Defensive, 20.44% Sector Weighting Not Classified, 0.00% Defensive 20.44% Consumer Defensive 8.89% Healthcare 8.19% Utilities 3.36% Cyclical, 33.49% Not Classified 0.00% Sensitive, 46.07% Total Exposure %

8 ETF Portfolio Global Exposure ETF Report for Regional Exposure Total ETF Portfolio Region Africa / Middle East Expsoure (%) 0.00% Africa / Middle East 0.00% Regional Exposure Asian Region 37.87% Asia Developed 25.74% Asia Emerging 9.94% Australasia 0.62% Japan 1.57% Europe Americas 14.80% Europe Developed 8.93% Europe Emerging 0.00% United Kingdom 5.86% 47.33% North America 47.32% Latin America 0.01% Africa / Middle East Asia Developed Asia Emerging Australasia Japan Europe Developed Europe Emerging United Kingdom Latin America North America Not Classified Not Classified 0.00% Not Classified 0.00% Total Regional Exposure %

9 Fundamental Ratios of the Exchange Traded Funds ETF Report for Cost / Income Ratio for Portfolio P. MER 0.34% $ CODE Company Daily Price $ Morning Star Recom Dividend Yield (%) Annual Dividend 2011 Total Dividend Prospectus Net Expense Ratio Prospectus Net Expense Ratio Cost ($) Net Asset Value (Daily) Base Currency Premium / Discount (%) Name of Benchmark Comparison Benchmark 1 Yr (Daily) Total Ret 1 Yr (Daily) Base Currency Price Earnings for ETF P. Income 1.06% $1, Beta 1 Yr (Qtr- End) AUD Sharpe Ratio to Base Currency Total Market Value(Long) Portfolio Currency IOO ishares S&P Global 100 (AU) $57.75 Recommended 1.54% $0.89 $ % $ $ % S&P Global 100 TR -8.07% % $1,043,303,290 IAA ishares S&P Asia 50 (AU) $40.67 Recommended 0.88% $0.36 $ % $ $ % S&P Asia 50 TR -9.83% % $195,952,839 VTS Vanguard US Total Market Shares (AU) ETF $64.61 Recommended 0.71% $0.46 $ % $31.50 $ % MSCI US Broad Market USD -4.05% -3.70% $145,947,765,342 Total Average Ratios Ratio Analysis for Exchange Traded Fund 1.06% $1, % $ * Data source obtained from Morning Star Research. Information and data can be varified by the attached Morning Star report.

10 Morningstar Commentary on the Exchange Traded Funds For Code Exchange Traded Fund Morning Star Reommendation MER IOO ishares S&P Global 100 (AU) Recommended 0.400% Morning Star Commentary The investment seeks results that correspond to the price and yield performance of global large-cap stocks, as represented by the Standard & Poor's Global 100 index. The index is a subset of the S&P Global 1200 index. It is designed to measure the performance of 100 large transnational companies that are of major importance in the global markets and have a minimum adjusted market capitalization of US$5 billion. IAA ishares S&P Asia 50 (AU) Recommended 0.500% The fund generally invests at least 90% of assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. The index is a free float-adjusted, market capitalizationweighted index that is designed to measure the performance of the 50 leading companies from four Asian markets: Hong Kong, Singapore, South Korea and Taiwan. It is non-diversified. VTS Vanguard US Total Market Shares (AU) ETF Recommended 0.070% The Vanguard US Total Market Shares Index ETF is the name given to the CDIs that are quoted on the AQUA market of the ASX. CDIs facilitate the buying and selling of US ETF Securities issued by a US fund called the Vanguard Total Stock Market Index Fund, a series of Vanguard International Equity Index Funds, a Delaware Statutory Trust. The US ETF Securities are listed on NYSE Arca. * Data source obtained from Morningstar Research. Information and data can be varified by the attached Morningstar report.

11 ETF Top 5 Exposure Report Funds Holding Report for Code Top 5 Company Exposure within the ETF ETF exposure to company IOO ishares S&P Global 100 (AU) 17.47% Company Funds Exposure 1. Exxon Mobil Corporation 5.734% 2. International Business Machines Corp 3.005% 3. Microsoft Corporation 2.959% 4. Chevron Corp 2.954% 5. General Electric Co 2.821% IAA ishares S&P Asia 50 (AU) 33.66% Company Funds Exposure 1. Samsung Electronics Co., Ltd % 2. Taiwan Semiconductor Manufacturing 6.565% 3. China Construction Bank Corp 5.231% 4. China Mobile Ltd % 5. Industrial And Commercial Bank Of China Ltd % VTS Vanguard US Total Market Shares (AU) ETF 10.29% Company Funds Exposure 1. Exxon Mobil Corporation 2.838% 2. Apple, Inc % 3. International Business Machines Corp 1.681% 4. Microsoft Corporation 1.498% 5. Chevron Corp 1.475% * Data source obtained from Morning Star Research. Information and data can be varified by the attached Morning Star report. * Top 5 holdings for each Exchange Traded fund are updated on the 15th of everymonth.

12 Report Descriptions Current ETF holding Report: ETF Recommendations Report Analysis of New ETF Portfolio Report Displays the current Exchange Traded Funds holdings in the portfolio. ETF that are flagged with *** are not included in the analysis. Current ETF holding provides only factual information on existing holdings. Displays current ETF holdings and actions required to transition the portfolio to the new proposed portfolio. Report also provide a guide to the expected cost of brokerage should it be transacted on that day. Provides an overview of the proposed new ETF portfolio. The report provides a summary of the weighting and Morningstar recommendation. Sector Exposure: Displays the broad sector weights according to the Morningstar sectorial methodology. Thre are 3 broad sectors Information-(Software, Hardware, Media and Telecommunication), Service - (Healthcare, Consumer Services, Business Services and Financial Services) and Manufacturing - (Consumer Goods, Industrial Material, Energy and Ultility). Regional Exposure: Displays the Morningstar regional classification. The classification has been separated into four region, 1. Africa - (Africa / Middle East), 2. Asian Region - (Asia Developed, Asia Emerging, Australasia and Japan), 3. Europe - (Europe Developed, Europe Emerging and United Kingdom), 4. Americas - (North America and Latin America). Dividend Management Expense Ratio (%) Net Asset Value (Per Unit) Premium / Discount (%) Market Return YTD (%) ETF Total Return 1Yr (%) Price Earnings for ETF Beta Alpha Tracking Error Market Cap (M) Highly Recommended Recommended Investment Grade Inferior Avoid Total dividend paid by the Exchange Traded Fund The cost involved in managing the Exchange Traded Fund represented in percentage term. The most- recent net asset value, which is the funds's share price. Funds compute this value daily by dividing the total net assets by the total number of shares. NAV updates offer a way of tracking the value of an investment. Changes in NAB can reveal capital appreciation (increase) or depreciation (decrease). The NAC will fall any time a fund makes distribution, regardless of the distribution amount. Means whether the ETF is trading at a premium or discount to it Net Asset Value compared to last nights' trading price for the Exhange Traded Fund. A stock, exchange-traded or closed-end fund s total return based on market prices, as opposed to NAV. Morningstar calculates the market-price, investing all income and capital gains distributions during the period, and dividing by the starting market price. Expressed in percentage terms, Morningstar's calculation of total return is determined each month by taking the change in monthly net asset value, reinvesting all income and capital gains distribution during that month, and dividing by the starting NAV. A fund's price/earnings ratio can act as a gauge of the fund's investment strategy in the current market climate, and whether it has a value or growth orientation. Companies in those industries enjoying a surge of popularity tend to have high P/E Ratios, reflecting a growth orientation. Beta is a measure of systematic risk with respect to a benchmark. Systematic risk is the tendency of the value of the fund and the value of benchmark to move together. Beta measures the sensitivity of the fund's excess return (total return minus the risk-free return) with respect to the benchmark's excess return that result from their systematic co-movement. A measure of the difference between a portfolio's actual returns and its expected performance, given its level of risk as measured by beta. A positive Alpha figure indicated the portfolio has performed better than its beta would predict. In contrast, a negative Alpha indicated the portfolio has underperformed, given the expectations established by beta. Tracking error is a measure of the volatitility of excess returns relative to a benchmark. The net aggregated market value of all the securities in a fund's portfolio. These represent Morningstar Analysts highest conviction picks. Morningstar award this rating to ETF s that it believes are of the highest quality and have strong investment merit. To earn this rating an ETF must be significantly better than its peers in most key respects. Believes ETFs are above average and have key advantages over competitors and while these are worthy funds, analysts don t see them as the very best. Morningstar Analysts do not have a high degree of conviction and they don t stand out relative to peers but should get the job done. ETFs are thought to be deficient relative to their peers in many key respects. ETF lacks a strong investment case or are inherently too risky or are managed/implemented poorly. Morningstar analysts believe there is a severe structural defect at the parent organisation or the ETF which makes these offerings extremely poor investments.

13 Disclaimer The Exchange Traded Funds Portfolio report is a limited advice information service provided only to financial industry professionals who act as a representative of, or who hold, an Australian Financial Services Licence ( you ). CommSec Wholesale Advisory relies on information provided by you in constructing an Exchange Traded Funds Portfolio Report to assist you in meeting your client s objectives and its accuracy depends on the correctness and extent of your disclosure to CommSec Wholesale Advisory. You must therefore assess whether it is appropriate, in the light of your analysis and understanding of your clients relevant personal circumstances (including but not limited to their objectives, financial situation and needs) to act upon this advice. The Exchange Traded Funds Portfolio report is a tool to assist you in the preparation of a financial advice for your client and is not intended for stand-alone use. You are expressly prohibited from providing or passing on any part of the Exchange Traded Funds Portfolio report or the advice contained within it directly to your client. The Exchange Traded Funds Portfolio report does not in any way validate the allocations of your client s investment portfolio in the various asset classes, particularly the level of investment in equities. Equities are the most volatile asset sector as equity prices vary daily and are influenced by factors that relate either to the company and industry in which the company operates, or general economic conditions. We have not taken into consideration any foreign exchange or any other related risk whilst constructing the Exchange Traded Funds portfolio. The income and capital growth projections are intended as a guide only to likely returns over the medium to long term and should not be relied upon as a guarantee of future performance, as past performance is not a reliable indicator of future performance. The Portfolio Report does not include information on tax. CommSec Wholesale Advisory does not provide tax advice and you should consider or assess the impact of tax on your client s financial plan or seek the advice of a tax professional. The information in the Portfolio Report is based on data obtained from sources believed to be reliable but the completeness and accuracy of this information is not guaranteed. The information or opinions expressed in the report are subject to change without notice and CommSec Wholesale Advisory is under no obligation to update or ensure the currency of the information contained herein. Commonwealth Securities Limited does not accept any liability, whether direct or indirect, arising from the use of this information. The Exchange Traded Funds Portfolio report is current as at the date on page one of this document and CommSec Wholesale Advisory recommends that portfolios are reassessed annually, as a minimum, and adjusted as necessary. Please note, automatic reviews are not part of the service and it is the responsiblity of the Financial Planner to request any specific reviews.

14 Page 1 of 2 Investment Detail Print date 04/07/12 ishares S&P Asia 50 (AU) IAA Morningstar Category TM Manager Index Net Assets 30/06/12 Morningstar Recommendation Status Inception Equity Asia Pacific w/o Japan S&P Asia 50 TR AUD $51.5 M Recommended Trading 10/09/08 Morningstar Take Alison Stauss 16/12/11 ishares S&P Asia 50 Index (IAA) is useful for investors after dedicated Asian equities exposure, but should be used carefully in a broader global equities allocation. ishares has been running an identical Asia 50 portfolio in the US since 2008 which has significant resources and experience behind it. While Asia 's long-term growth outlook looks attractive, we should point out that Asian equities are considerably more volatile than their broader global counterparts. IAA is well-diversified within the Asian region, Korea, China, and Taiwan all taking larger shares of the portfolio. Sector exposures are less diverse, financial and information technology stocks accounting for more than half the portfolio. The top holdings Samsung Electronics, Taiwan Semiconductor, China Mobile, and China Construction Bank account for nearly a third of the portfolio, and all pose stock-specific risks. IAA could be a good diversifier for local investors, given the relatively low correlation with Australian equities (0.58 percent over the past decade) and the domestic market's lack of information technology stocks. IAA is cross-listed on the ASX from the primary listing in New York. The upside here is that local investors can tap into the liquidity of the primary listing. This also means that Australians are required to pay withholding tax (15.0 percent) on semi-annual distributions. Estate tax may also be payable on deceased estates. It s also worth noting that ishares participates in securities lending. The portfolio is unhedged and therefore vulnerable to currency fluctuations. ishares charges investors 0.50 percent annually, which is less expensive than the dedicated country and emerging markets ETFs, but pricier than global offerings. IAA is one of the more actively-traded ETFs, despite its average bid/ask spread climbing over the last six months. IAA is an appropriate investment for suitors looking to get in on the Asian growth story and comfortable with the associated risks. Pricing Information Closing Market Price (03/07/12) $40.55 NAV (29/06/12) $40.12 Premium/Discount (29/06/12) 0.44 Trading Information 03/07/12 52-Week High/Low $36.04 / $45.00 Average Daily Shares Traded (1 Yr) 6,167 Shares Outstanding (31/01/12) 1,220,837 Exchange ASX Fees Management Fee % pa 0.5 Operations Manager ishares Trust Website Telephone Address PO Box N43, Grosvenor Place, Sydney, 1220, Australia NAv NAv Investment Style Market Return % NAV Return % Manager Index % NAv Category Index % Premium/Discount Avg % Premium/Discount High % Premium/Discount Low % Trailing Total Returns 30/06/12 6 Mth 1 Yr 3 Yr 5 Yr 10 Yr Market % NAV % Index % Category % NAv NAv NAv NAv NAv Portfolio 02/07/12 Top 20 Holdings % Assets Samsung Electronics Co Ltd Taiwan Semiconductor Manufacturing 6.94 China Mobile Ltd China Construction Bank Corp H Shares 4.70 Hyundai Motor Co Ltd 3.44 Industrial And Commercial Bank Of China Ltd CNOOC, Ltd AIA Group Ltd Hon Hai Precision Ind. Co., Ltd PetroChina Co Ltd H Shares 2.57 POSCO 2.15 DBS Group Holdings Ltd 1.89 Hutchison Whampoa Ltd 1.88 Oversea-Chinese Banking Corp Ltd 1.88 China Life Insurance Co Ltd H Shares 1.82 United Overseas Bank Ltd Singapore Telecommunications Limited 1.76 Hyundai Mobis Co., Ltd Sun Hung Kai Properties, Ltd Kia Motors Corp % Assets In Top 20 Holdings Total Number of Holdings 53 Risk Measures (NAV) 30/06/12 3 Yr 5 Yr Standard Deviation Sharpe Ratio Tracking Error 2.01 Information Ratio Alpha Beta 0.96 Morningstar Style Box TM Large Value These funds own mostly larger-sized companies the fund manager believes are overlooked by the market and trading relatively cheaply. Market Cap Breakdown Stocks % Giant Large 7.83 Medium 0.55 Small 0.00 Micro 0.00 Top 5 World Regions Stocks % Asia Developed Asia Emerging TM

15 Page 1 of 2 Investment Detail Print date 04/07/12 ishares S&P Global 100 (AU) IOO Morningstar Category TM Manager Index Net Assets 30/06/12 Morningstar Recommendation Status Inception Equity World Large Blend S&P Global 100 TR AUD $195.4 M Recommended Trading 10/10/07 Morningstar Take Alison Stauss 16/12/11 ishares S&P Global 100 Index (IOO) is a good one-stop shop for global equities exposure. IOO is well-diversified across global regions, sectors, and securities, and is reasonably-priced at 0.40 percent annually, but could be cheaper. ishares has been running an identical Global 100 portfolio in the US for almost a decade. IOO invests in the S&P Global 100 Index, a subset of the S&P Global Contrary to expectations, it doesn't invest in the biggest 100 firms. Instead, holdings are selected on international business exposure and S&P's judgement. Many of these firms own the biggest and most established global brands. The portfolio is reasonably diversified across regions, although the US does make up almost half the portfolio. IOO is also well-spread across sectors, with financials, consumer staples, information technology, energy, and healthcare the major areas. IOO would be a good diversifier for local investors, given the very low correlation with Australian equities and the domestic market's lack of healthcare and information technology companies. Although IOO has no explicit exposure to emerging markets, global names like Nestle, Johnson & Johnson, and Microsoft source significant revenues from developing countries. Suitors should be aware that this is a purely large-cap-focused benchmark. IOO is cross-listed on the ASX from the primary listing in New York. The upside here is that local investors can tap into the liquidity of the primary listing. This also means that Australians are required to pay withholding tax (15.0 percent) on semi-annual distributions. Estate tax may also be payable on deceased estates. It s also worth noting that ishares participates in securities lending, the revenues from which are mostly used to offset costs. ishares charges investors 0.40 percent annually, which is relatively inexpensive relative to similar options. Investors looking for exposure to the biggest, most recognised global brands would do well to consider IOO. Pricing Information Closing Market Price (03/07/12) $57.79 NAV (29/06/12) $57.50 Premium/Discount (29/06/12) Trading Information 03/07/12 52-Week High/Low $51.39 / $62.48 Average Daily Shares Traded (1 Yr) 8,192 Shares Outstanding (31/01/12) 3,095,478 Exchange ASX Fees Management Fee % pa 0.4 Operations Manager ishares Trust Website Telephone Address PO Box N43, Grosvenor Place, Sydney, 1220, Australia NAv NAv Investment Style Market Return % NAV Return % Manager Index % NAv Category Index % Premium/Discount Avg % Premium/Discount High % Premium/Discount Low % Trailing Total Returns 30/06/12 6 Mth 1 Yr 3 Yr 5 Yr 10 Yr Market % NAV % Index % Category % NAv NAv NAv NAv NAv Portfolio 02/07/12 Top 20 Holdings % Assets Exxon Mobil Corporation 5.61 Microsoft Corporation 3.21 International Business Machines Corp 3.17 General Electric Co 3.05 Chevron Corp 2.93 Nestle SA 2.77 Johnson & Johnson 2.62 Coca-Cola Co 2.50 Pfizer Inc 2.42 Procter & Gamble Co 2.36 HSBC Holdings PLC 2.29 Samsung Electronics Co Ltd GDR 2.15 Philip Morris International, Inc Novartis AG 2.13 Vodafone Group PLC 1.95 JPMorgan Chase & Co 1.94 Intel Corp 1.89 BP PLC 1.81 Merck & Co Inc 1.79 Royal Dutch Shell PLC Class A 1.76 % Assets In Top 20 Holdings Total Number of Holdings 110 Risk Measures (NAV) 30/06/12 3 Yr 5 Yr Standard Deviation Sharpe Ratio Tracking Error 1.92 Information Ratio Alpha Beta 0.99 Morningstar Style Box TM Large Value These funds own mostly larger-sized companies the fund manager believes are overlooked by the market and trading relatively cheaply. Market Cap Breakdown Stocks % Giant Large Medium 0.05 Small 0.00 Micro 0.00 Top 5 World Regions Stocks % North America Europe Developed United Kingdom Japan 4.54 Australasia 2.44 TM

16 Page 1 of 2 Investment Detail Print date 04/07/12 Vanguard US Total Market Shares (AU) ETF VTS Morningstar Category TM Manager Index Net Assets 30/06/12 Morningstar Recommendation Status Inception Equity North America MSCI US Broad Market PR AUD $64.5 M Recommended Trading 08/05/09 Morningstar Take Tim Murphy 05/06/12 Vanguard US Total Market Shares Index (VTS) is a strong candidate for investors seeking broad US market exposure. VTS offers a truly diversified portfolio at minuscule cost that is rivalled by very few products listed or unlisted in the Australian market. VTS tracks the MSCI US Broad Market Index, not the more commonly thought of S&P500. Vanguard has been managing an identical ETF in the US for almost a decade. Vanguard has a well-resourced and experienced team that manages the portfolio from the US. The firm uses optimised sampling rather than full replication to duplicate the US Broad Market Index. This approach is advantageous for investors because it reduces transaction costs and unnecessary portfolio turnover, but needs to be implemented correctly. The portfolio has more than 3,300 holdings and is well-divided among US sectors and market-cap segments. VTS has nearly 20.0 percent in mid-cap names and 10.0 percent in small- and micro-caps. This means that the portfolio should outperform more larger-cap-focused competitors when the smaller end of the market rallies, but will lag when it doesn't. The small- and micro-cap names will also add to portfolio volatility over time. VTS is cross-listed on the Australian Stock Exchange from the primary listing on the New York Stock Exchange. This means that Australians are required to pay withholding tax (15.0 percent) on the quarterly distributions. Investors should also be aware that estate tax may be payable. Vanguard charges a meagre 0.07 percent annually, making VTS the cheapest ETF in Australia and providing a key advantage over both ETF and managed fund peers. However, the bid/ask spread has increased over the year to 31 October Since launching in 2008, VTS has typically traded at a slight premium. Vanguard's low fees, broad diversification, and experience make it hard for us to fault VTS as a vehicle for US exposure, although investors should remember that they're missing out on opportunities outside the US. Pricing Information Closing Market Price (03/07/12) $68.12 NAV (29/06/12) $67.96 Premium/Discount (29/06/12) Trading Information 03/07/12 52-Week High/Low $55.40 / $70.46 Average Daily Shares Traded (1 Yr) 3,042 Shares Outstanding (31/01/12) 862,526 Exchange ASX Fees Management Fee % pa 0.07 Operations Manager Vanguard Investments Australia Ltd Website Telephone Address Level 2, 360 Collins Street, Melbourne, VIC, 3000, Australia NAv Investment Style Market Return % NAV Return % Manager Index % NAv Category Index % Premium/Discount Avg % Premium/Discount High % Premium/Discount Low % Trailing Total Returns 30/06/12 6 Mth 1 Yr 3 Yr 5 Yr 10 Yr Market % NAV % Index % Category % NAv NAv NAv NAv NAv Portfolio 31/03/12 Top 20 Holdings % Assets Apple, Inc Exxon Mobil Corporation 2.66 International Business Machines Corp 1.58 Microsoft Corporation 1.56 Chevron Corp 1.37 General Electric Co 1.36 AT&T Inc 1.19 Procter & Gamble Co 1.18 Johnson & Johnson 1.15 JPMorgan Chase & Co 1.12 Pfizer Inc 1.12 Wells Fargo & Co 1.10 Google, Inc. Class A 1.05 Philip Morris International, Inc Coca-Cola Co 0.97 Intel Corp 0.92 Oracle Corporation 0.75 Merck & Co Inc 0.75 Wal-Mart Stores Inc 0.74 Qualcomm, Inc % Assets In Top 20 Holdings Total Number of Holdings 3300 Risk Measures (NAV) 30/06/12 3 Yr 5 Yr Standard Deviation Sharpe Ratio 0.32 Tracking Error 1.78 Information Ratio 0.87 Alpha 1.49 Beta 1.00 Morningstar Style Box TM Large Blend These funds own a mixture of larger-sized growth and value companies, or companies which exhibit both characteristics. Market Cap Breakdown Stocks % Giant Large Medium Small 6.35 Micro 2.40 Top 5 World Regions Stocks % North America Europe Developed 0.39 United Kingdom 0.09 Asia Developed 0.09 Latin America 0.05 TM

17 Page 2 of 2 Investment Detail Print date 04/07/12 Exchange-Traded Fund (ETF) Investment Detail Disclosure Statement Morningstar Category A category is based on exposure to asset classes, investment sectors, the investment style and market-cap allocation, and the associated risk and return characteristics of the investment. The objective of the classification system is to provide groupings of investments which can be reasonably considered to be close investment alternatives and for which performance and other statistics such as fees are comparable. Morningstar Recommendation The Recommendation is a qualitative assessment of the people, process, portfolio, parent, and performance of an investment s manager as it relates to a particular investment strategy. The Morningstar Recommendation operates on a five-point scale: 'Highly Recommended', 'Recommended', 'Investment Grade', 'Inferior', or 'Avoid'. Morningstar Take The Morningstar Take is a summary of Morningstar's overall opinion of the manager's strategy and capabilities in the asset class. If Morningstar has not qualitatively reviewed the manager, the PDS Objective and Investment Strategy will appear in its place. Pricing Information Closing Market Price: The price of the ETF s ordinary shares as at the close of trading day. Net Asset Value (NAV): The value of the underlying investments in the portfolio on a per share basis is referred to as its Net Asset Value. This is computed daily (or monthly) by dividing the total net assets by the total number of shares. The price of an ETF relates to its NAV, but ultimately is determined by supply and demand. Therefore, an ETF may trade at a discount, premium or at par to its NAV. The NAV will fall any time an ETF makes a distribution, regardless of the distribution amount. Because NAVs fluctuate daily/monthly with the market, meaningful performance assessment should be based on the NAV rather than just movements in the share price. Premium/Discount: The premium or discount of the market price to the Net Asset Value (NAV) expressed as a percentage of the NAV. This is based on an average of month-end prices for the year. We calculate each month-end premium/discount figure, and then average out those 12 months for an average yearly premium/discount. Premium/Discount Avg % refers to the average monthly premium or discount over the time period specified. Premium/Discount High % and Low % refer to the highest and lowest premiums or discounts over the time period specified. Trading Information 52-Week High/Low: The highest and lowest market close prices traded over the last 52 weeks. Average Daily Shares Traded (1 Yr): The average daily traded number of shares over the trailing 52-week period. Shares Outstanding: The number of ordinary shares outstanding in the market as at the specified date. Exchange: The local stock exchange on which the ETF is listed and trading. Performance The performance data given represents past performance and should not be considered indicative of future results. Principal value and investment return will fluctuate, so that an investor's shares when redeemed may be worth more or less than the original investment. Growth of $10,000: The graph compares the growth of a $10,000 investment (based on Close Market Price and NAV) with that of a capital market index chosen by the investment manager and with that of the average growth for all investments in the equivalent Morningstar Open-End Managed Funds peer group. The index is an unmanaged portfolio of specified securities. The index and the category average do not reflect any initial expenses however the category average returns are net of ongoing fees. A portfolio may differ significantly from the securities in the index. Total return reflects performance without adjusting for sales charges but is adjusted to reflect any capital re-organisation (eg. an issue of bonus shares) and all actual ongoing expenses. It also assumes reinvestment of distributions. If adjusted for sales charges and the effects of taxation, the performance quoted would be reduced. Trailing returns for periods over one year are annualised. Monthly Trading Volume (Millions): The total number of ordinary shares which has traded during each calendar month. Risk Measures (NAV) Standard Deviation: The statistical measurement of dispersion about an average, which depicts how widely a portfolio's returns varied over a certain period of time. Investors use the Standard Deviation of historical performance to try to predict the range of returns that is most likely for a given investment. When a portfolio has a high standard deviation, the predicted range of performance is wide, implying greater volatility. Sharpe Ratio: A risk-adjusted measure developed by Nobel Laureate William Sharpe. It is calculated by using standard deviation and excess return to determine reward per unit of risk. The higher the Sharpe Ratio, the better the portfolio s historical risk-adjusted performance. The Sharpe Ratio can be used to compare two portfolios directly with regard to how much excess return each portfolio achieved for a certain level of risk. Morningstar first calculates a monthly Sharpe Ratio and then annualises it to put the number in a more useful per annum context. Tracking Error %: Tracking Error is a measure of the volatility of excess returns relative to a benchmark. Information Ratio: Information Ratio is a risk-adjusted performance measure. The Information Ratio is a special version of the Sharpe Ratio in that the benchmark doesn't have to be the risk-free rate. Alpha: A measure of the difference between a portfolio s actual returns and its expected performance, given its level of risk as measured by Beta. A positive Alpha figure indicates the portfolio has performed better than its Beta would predict. In contrast, a negative Alpha indicates the portfolio has underperformed, given the expectations established by Beta. Beta: Beta is a measure of a portfolio's sensitivity to market movements. The Beta of the market is 1.00 by definition. Morningstar calculates Beta by comparing a portfolio's excess return over T-bills to the benchmark's excess return over T-bills, so a Beta of 1.10 shows that the portfolio has performed 10% better than its benchmark in up markets and 10% worse in down markets, assuming all other factors remain constant. Conversely, a Beta of 0.85 indicates that the portfolio's excess return is expected to perform 15% worse than the benchmark s excess return during up markets and 15% better during down markets. Fees Management Fee % pa: This is the amount as a percentage of the investor s assets that the investment manager is entitled to charge an investor each year. Portfolio Morningstar Style Box: The Morningstar Equity Style Box TM is a grid that provides a graphical representation of the market capitalisation (the vertical axis) and investment style (the horizontal axis) of the portfolio. The size and investment style (value, blend or growth) of the individual stocks is aggregated to determine the overall placement (represented by the shaded area) of the portfolio within the grid. The calculations are based on the latest full portfolio holdings information available to Morningstar from the investment manager or its annual report/asx announcements. The Style Box graphics which appear above the Growth of $10,000 chart show how an ETF s market-cap and investment style have changed over time. Top 20 Holdings: The largest equity exposures of an ETF s portfolio. Portfolio holdings information is based on the most recent information available to Morningstar. Top 5 World Regions: An ETF s largest regional exposures. Market Cap Breakdown: The ETF s equity investment exposure broken down by market capitalisation (giant, large, medium, small, or micro). TM