Lonsec Diversified Direct Model Portfolios

Lonsec Diversified Direct Model Portfolios ISSUE DATE 30-04-2015 Performance review Model portfolios RETURNS TO 31 MAR 2015 SECURE DEFENSIVE CONSERVATIVE BALANCED GROWTH HIGH GROWTH 3 MONTHS (%) MODEL PORTFOLIO 0.7 3.5 5.2 7.0 8.6 10.4 PEER GROUP BENCHMARK 0.7 2.9 3.3 5.1 6.3 6.9 EXCESS RETURN 0.0 0.6 1.9 1.8 2.3 3.5 6 MONTHS (%) MODEL PORTFOLIO 1.4 7.1 9.6 12.0 13.8 16.3 PEER GROUP BENCHMARK 1.4 5.1 6.1 8.6 10.6 11.3 EXCESS RETURN 0.0 2.0 3.6 3.4 3.3 5.0 1 YEAR (%) MODEL PORTFOLIO 2.7 10.8 14.0 16.8 18.6 21.6 PEER GROUP BENCHMARK 2.7 7.5 9.0 12.1 14.5 15.2 EXCESS RETURN 0.0 3.3 5.1 4.7 4.1 6.3 3 YEARS (%) MODEL PORTFOLIO 3.0 7.9 10.9 13.9 16.6 19.4 PEER GROUP BENCHMARK 3.0 6.2 7.4 10.4 12.5 13.2 EXCESS RETURN 0.0 1.7 3.5 3.5 4.1 6.2 SINCE INCEPTION (%PA) - JAN 2011 MODEL PORTFOLIO 3.6 7.0 8.7 9.9 11.3 12.5 PEER GROUP BENCHMARK 3.6 5.6 6.4 8.0 9.2 9.5 EXCESS RETURN 0.0 1.4 2.3 1.9 2.1 3.0 Portfolios are rebalanced monthly to maintain model portfolio weights. Physical portfolio results will differ depending on cash levels, inception date, fees and adherence to the model portfolio weights. Past performance is not a reliable indicator of future performance. * Peer Group Benchmark based on Financial Express UT Peer Group Multi-Asset Indices. P 1

Overview of the Quarter A strong February was the driver behind the Australian equity market's robust quarterly return of 10.3%. The quarter was positive for all sectors apart from Energy, with the strongest performance stemming from Utilities, Consumer Discretionary and Financials. The Materials sector continues to tread water due to the rapid decline in the iron ore price due to imbalances in the demand and supply equation. In particular, the majors continue to push their ambitious volume expansion plans in the face of a Chinese economic slowdown. Global equities started 2015 strongly, returning 9.6% for the quarter off the back of a 15% return for calendar year 2014. Returns for the quarter were bolstered by strongly performing markets in Japan and Europe (specifically German and Portuguese markets), both of which were assisted by tail winds generated from their respective quantitative easing programs. US equity performance has slowed in recent quarters following several years of strong performance. The Australian listed property sector delivered a return of 9.2% over the quarter, marginally underperforming the broader domestic equity market. Global property securities had another strong quarter in absolute terms, returning 7.3% (hedged in Australian dollars) - versus the global equity market which returned 9.6%. The strong performance of the sector has been primarily driven from the highly stimulatory quantitative easing programs being undertaken by central banks globally. Australian fixed interest returned 2.7% for the quarter. Longer maturing Australian sovereign securities' yields have fallen rapidly over the last 6 months, which has coincided closely with a deteriorating outlook for the domestic economy. While the asset class appears overvalued on nearly all measures, the absolute yield being offered in Australia is still comparatively high compared to other developed nations. Globally, despite on the surface appearing attractive relative to peers, the US fixed interest market is burdened by investors' uncertainty regarding the timing and magnitude of US rate rises. In Europe, absolute yields on longer dated debt have undergone material declines from already low levels over the last 6-12 months. Global fixed interest returned 2.6% for the quarter. Overview of the Year Equities continued to deliver positive returns in the 12 months to March, with Australian equities up 13.9 % and global equities gaining 28.3% (in Australian dollar terms). Low interest rates continued to support equity markets both domestically and globally, with some regions also benefiting from quantitative easing programs (notably Europe and Japan). This can be seen in the performance of the major regions for the year to March, with Japan overtaking the US as the strongest performer (30.5% compared to the US' 12.2%) in local currency terms, while Europe rebounded strongly (14.7%). Australian and global REIT markets continued to be the best performing asset classes, returning 34.4% and 29.6% respectively for the year. Property securities' yield characteristics continued to be attractive in a low interest rate environment, while the sector's defensive characteristics appealed to investors in 'risk off' periods, such as when the oil price plunged late in 2014. Australian fixed interest markets returned 11.1% for the year. Demand for Australian sovereigns has been driven by the mass stimulus being undertaken by the European Central Bank and the Bank of Japan, as well as deteriorating economic indicators domestically. In global markets (10.3%), uncertainty over the timing of US rate hikes remains the key concern, although the US is one of only a few markets offering any real term premiums for extending duration out the curve. ECB actions also drove European bond yields lower. The model portfolios generated positive absolute returns for the year. Relative returns also continued to be positive across all risk profiles. Strong relative performance was recorded by the Lonsec Core Portfolio within Australian equities as well as the portfolios' hybrid exposures. The Diversified Direct portfolios recorded another quarter of positive absolute returns, primarily driven by equities. Relative returns were also positive, with outperformance being spread between equities and hybrids. P 2

Australian equities - fund contributions LONSEC AUSTRALIAN EQUITY CORE MODEL PORTFOLIO 10.7 14.3 15.4 16.0 VANGUARD MSCI AUSTRALIAN SMALL COMPANIES INDEX 8.3 7.3 5.3 2.4 S&P/ASX 300 ACCUMULATION INDEX 10.3 13.6 13.9 15.3 Australian equities started the new year strongly with a 10.3% gain. Small caps lagged the large cap sector, returning 7.1% for the quarter. The Lonsec Core Portfolio contributed to relative performance, as defensive and higher-yielding sectors such as REITs, Telecommunications and Utilities continued to outperform the broader market as bond yields fell. The Vanguard ETF underperformed the ASX300 but performed in line with its small cap benchmark. Lonsec Australian Equity Core Model Portfolio The Lonsec Australian Equity Core Model Portfolio outperformed the benchmark over the March quarter. Ansell, Flight Centre and Westpac were the main contributors to performance, while Woodside, Woolworths and CSL were the main detractors. The Manager noted that the portfolio's mid-cap stocks have been generating strong performance as intended. The Manager recently introduced a new mid-cap stock in Qube Holdings and reduced the portfolio's weighting in Woolworths. The Manager remains comfortable with all holdings, including the resource stocks. The BHP/South 32 demerger is coming up in May and the Manager will make a decision on the S32 holding in May/June 2015. The Manager's investment themes are: low growth and low real interest rate environment to persist; global population growing, ageing and becoming more mobile; and Asian growth in transition. The portfolio is expected to provide an attractive combination of yield and growth, with less volatility than the market. The Manager also expects to outperform the benchmark, over the medium to long term. VANGUARD MSCI AUSTRALIAN SMALL COMPANIES INDEX The Vanguard MSCI Australian Small Companies Index ETF underperformed the ASX300 over the March quarter, but performed in line with its small cap benchmark. Global equities - fund contributions VANGUARD ALL-WORLD EX-US SHARES INDEX ETF 11.9 15.1 20.8 18.1 VANGUARD US TOTAL MARKET SHARES INDEX ETF 8.7 22.7 36.4 28.9 MSCI AC WORLD INDEX EX AUSTRALIA (NET TR) AUD 9.6 17.8 28.3 22.8 Global equities continued its strong run into the new year, returning 9.6% for the quarter. Fund selection was mixed against the broader MSCI benchmark, however both ETFs broadly matched their respective regional benchmarks, in keeping with Vanguard's passive approach. VANGUARD ALL-WORLD EX-US SHARES INDEX ETF The Vanguard All-World ex-us Shares Index performed in line with its benchmark over the March quarter, in keeping with the Fund's passive approach. VANGUARD US TOTAL MARKET SHARES INDEX ETF The Vanguard US Total Market Shares Index performed in line with its benchmark over the March quarter, in keeping with the Fund's passive approach. Property - fund contributions VANGUARD AUSTRALIAN PROPERTY SECURITIES INDEX ETF 9.4 21.6 33.7 22.0 S&P/ASX 300 PROPERTY TRUSTS ACCUM INDEX 9.2 21.6 34.4 22.6 Domestic and global listed property markets posted another quarter of positive performance however underperformed broader equity markets, with the domestic index gaining 9.2% and the global market returning 7.3%. Property fund selection was neutral as the Vanguard ETF performed broadly in line with the benchmark for the quarter (based on close price). VANGUARD AUSTRALIAN PROPERTY SECURITIES INDEX ETF The Vanguard Australian Property Securities Index ETF performed broadly in line with the benchmark over the March quarter (based on its closing price). P 3

Income assets - fund contributions AGL SUBORDINATED NOTES 2.6 5.0 5.3 ANZ SUBORDINATED NOTES -0.1 2.3 5.3 6.7 ISHARES COMPOSITE BOND ETF 3.2 7.4 11.9 7.1 WOOLWORTHS NOTES II 0.7 1.7 4.2 5.8 BLOOMBERG AUSBOND BANK BILL INDEX 0.7 1.4 2.7 3.0 BLOOMBERG AUSBOND COMPOSITE 0+ YR INDEX 2.7 6.7 11.1 7.1 Credit spreads were relatively flat for the second consecutive quarter, an encouraging sign given the floating rate market absorbed a 25bps rate cut and $2.8bn of new issuance. AGLHA continued its strong performance to record its second consecutive quarterly gain in excess of 2%. WOWHC was steady while ANZHA underperformed after outperforming significantly in the December quarter. The RBA lowered the cash rate by 25bps to a record low 2.25% in February 2015, and while it didn't follow through with a second cut in March or April, the easing bias is clear. The market continues to price in a second rate cut this year, therefore it is possible that coupons on floating rate debt and hybrid securities will lower at some stage this year. Nevertheless, the portfolios' listed income securities are expected to generate steady returns over the longer term, and offer cash running yields of 4.8-5.7% p.a., which is attractive in comparison to the cash benchmark rate of 2.25%. AGL SUBORDINATED NOTES The AGL Subordinated Notes (AGLHA) outperformed the cash benchmark over the March quarter. ANZ SUBORDINATED NOTES The ANZ Subordinated Notes (ANZHA) underperformed the cash benchmark over the March quarter. ISHARES COMPOSITE BOND ETF The ishares UBS Composite Bond Index Fund (IAF) outperformed the Bloomberg AusBond Composite Index over the March quarter (based on close price). WOOLWORTHS NOTES II The Woolworths Floating Rate Notes II (WOWHC) performed in line with the cash benchmark over the March quarter. P 4

ISSUE DATE 30-04-2015 Performance review Model portfolios RETURNS TO 31 MAR 2015 SECURE DEFENSIVE CONSERVATIVE BALANCED GROWTH HIGH GROWTH 3 MONTHS (%) MODEL PORTFOLIO 0.7 3.5 5.2 7.0 8.6 10.4 BENCHMARK PORTFOLIO 0.7 3.5 5.1 6.7 8.3 9.9 EXCESS RETURN 0.0 0.0 0.1 0.2 0.3 0.5 6 MONTHS (%) MODEL PORTFOLIO 1.4 7.1 9.6 12.0 13.8 16.3 BENCHMARK PORTFOLIO 1.4 7.1 9.5 12.2 14.4 16.5 EXCESS RETURN 0.0 0.0 0.1-0.2-0.5-0.2 1 YEAR (%) MODEL PORTFOLIO 2.7 10.8 14.0 16.8 18.6 21.6 BENCHMARK PORTFOLIO 2.7 11.1 14.3 17.5 20.1 22.7 EXCESS RETURN 0.0-0.2-0.3-0.7-1.6-1.1 3 YEARS (%) MODEL PORTFOLIO 3.0 7.9 10.9 13.9 16.6 19.4 BENCHMARK PORTFOLIO 3.0 8.5 11.6 14.7 17.6 20.5 EXCESS RETURN 0.0-0.6-0.7-0.8-0.9-1.1 SINCE INCEPTION (%PA) - JAN 2011 MODEL PORTFOLIO 3.6 7.0 8.7 9.9 11.3 12.5 BENCHMARK PORTFOLIO 3.6 8.1 9.9 11.6 13.0 14.4 EXCESS RETURN 0.0-1.1-1.2-1.7-1.8-1.9 Portfolios are rebalanced monthly to maintain model portfolio weights. Physical portfolio results will differ depending on cash levels, inception date, fees and adherence to the model portfolio weights. Past performance is not a reliable indicator of future performance. * SAA Benchmark based on the market indices on the following page. P 5

ISSUE DATE 30-04-2015 Indices used for performance comparisons and for benchmark construction: AUSTRALIAN EQUITIES S&P/ASX 300 ACCUMULATION INDEX GLOBAL EQUITIES MSCI AC WORLD INDEX EX AUSTRALIA (NET TR) AUD INCOME ASSETS BLOOMBERG AUSBOND BANK BILL INDEX INCOME ASSETS BLOOMBERG AUSBOND COMPOSITE 0+ YR INDEX PROPERTY S&P/ASX 300 PROPERTY TRUSTS ACCUM INDEX The model portfolios change over time therefore performance is not calculated on a static mix of funds. Analyst Disclosure & Certification Analyst remuneration is not linked to the research or rating outcome. Where financial products are mentioned, the Analyst(s) may hold the financial product(s) referred to in this document, but Lonsec considers such holdings not to be sufficiently material to compromise the rating or advice. Analyst holdings may change during the life of this document. The Analyst(s) certify that the views expressed in this document accurately reflect their personal, professional opinion about the matters and financial product(s) to which this document refers. Date released April 2015 Analyst EMenniti Approved by vklaus P 6 IMPORTANT NOTICE: This document is published by Lonsec Research Pty Ltd ABN 11 151 658 561, AFSL No. 421445 (Lonsec). Please read the following before making any investment decision about any financial product mentioned in this document. Disclosure at the date of publication: Lonsec has provided consulting advice to the Client in the preparation of this Report, and received a fee from the Client for its advice. Lonsec also receives a fee from relevant fund manager or product issuer(s) for researching financial products (using comprehensive and objective criteria) that may be referred to in this Report. 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