Macquarie PPM Core Australian Equity Strategy Overview November 2016 Macquarie Investment Management Market Overview It was a positive month for the Australian equities market despite a surprise US election result early in the month. There were broad based sector gains with Financials and Banks continuing to perform strongly. Healthcare and Telco s were the only sectors to fall short of positive returns. Global equity markets were once again mixed. The US led global performance as markets surged following the election result despite a strong rise in US bond yields. European equities were down as fears of potential political change continued to overhang performance. Commodity markets surged in November with Iron Ore, Copper, Lead, Zinc and Nickel all rallying strongly. The Oil price also rallied after OPEC agreed to cut production by 1.2m barrels per day, driving the Brent Oil price above $50 per barrel. Precious metals were the exception with the price of Gold falling over the month. In company news, Boral entered into a binding agreement to acquire Headwaters Incorporated. South32 announced it has entered into a binding agreement with Peabody to acquire it Metropolitan Colliery and a 16.7 interest in the Port Kembla Coal terminal. Rio Tinto announced a 5 year US$5bn productivity target. Key detractors to performance included overweight positions in isentia Group and Amcor. isentia Group s share price fell following a downgrade in earnings guidance during the month. Amcor also underperformed during the month, largely due to macroeconomic factors which have negatively impacted global industrial growth stocks. Outlook Uncertainty and volatility are expected to remain in global markets as investors attempt to price the potential impact of rising rates in the US. Commodity prices remain volatile. The outlook for Oil remains robust driven by stable demand and slowing supply. Select bulk commodities continue to rise aggressively thanks to China stimulus and a variety of supply side constraints. On the stock front, quality stocks that miss on earnings expectations are continuing to come under serious pressure. Conversely, value stocks that deliver in-line have performed strongly in recent months. Whilst the challenge of navigating uncertain markets remains, we continue to believe there are significant opportunities for those that know where to look. In the domestic economy, the Reserve Bank of Australia (RBA) cash rate remained unchanged at 1.50 consistent with sustainable growth in the economy. Consumer sentiment fell surrounding the US election and the volatility in equity markets. Employment data came in below expectations and wages growth has been persistently low. On a positive note, the unemployment rate and participation rate remained unchanged. Portfolio Highlights The portfolio returned +2.14 during November, compared to the benchmark which returned +2.99. The largest positive overweight contributors for this month included positions in AGL Energy, James Hardie Industries Plc and BHP Billiton. AGL Energy outperformed during the month as the company continues to benefit from increased wholesale electricity prices. BHP Billiton also performed well, benefiting from a stronger iron ore price (+17) and oil price (+5) over the month. 1
Core portfolio November 2016 Model portfolio performance 30 November 2016 Since 1 month 3 months 6 months 1 year (pa) 2 years (pa) 3 years (pa) 5 years (pa) 7 years (pa) 10 years (pa) inception 30.04.04 Core strategy 2.14-1.30-3.71 2.98 6.30 5.71 11.23 6.96 6.00 10.66 S&P/ ASX 200 Accum. Index 2.99 1.26 3.36 10.03 5.88 5.35 10.59 6.76 4.46 8.50 Source: MPPM, IRESS Macquarie PPM Core portfolio summary of changes Stock Action Changes made Inghams Group Australia and New Zealand Banking Group Brambles Vocus Communications Isentia Group Added to position 1.6 New position 8.6 Exited position 5.5 Exited position 2.5 Exited position 1.6 We increased the holding in poultry producer, ING, following its initial public offer. We established a new investment in major banking group, ANZ, following a review of our bank sector positioning. We have moderated the underweight to the sector following a reasonable bank reporting season. ANZ continues to focus on business restructuring and cost reductions. We exited the holding in global pallet pooling company, BXB, to moderate our overweight exposure to global industrials (note we also hold AMC, JHX and CSL). Additionally, we remain cautious about recent management changes at both the CEO and CFO level. We exited the investment in telecommunications company, VOC, on risk management grounds. We have become increasingly concerned about ongoing management changes, integration risk and uncertainty regarding the medium-term outlook for margins. We exited the investment in media intelligence company, ISD, on risk management grounds. While we continues to view the domestic media monitoring business positively, we are cautious regarding the ongoing performance of the King Content business. Model top 10 holdings ASX code Weight BHP 8.98 CBA 7.26 CASH 6.32 CSL 6.19 WES 5.96 AMC 5.63 WBC 5.57 BXB 5.45 JHX 5.38 Sector allocation Sector Portfolio Benchmark () () Consumer discretionary 0.00-4.88 Consumer staples 7.94 1.01 Energy 2.91-1.17 Financials (ex REITS) 17.34-14.61 Healthcare 11.13 4.71 Industrials 5.33-1.55 Information technology 2.14 0.91 Materials 27.17 10.92 Telecommunication services 4.34-0.36 Utilities 3.67 1.17 2
Core portfolio November 2016 If you have any questions, please contact your adviser or our client service team on 1800 501 180. Disclaimer: This document has been prepared by Macquarie Private Portfolio Management (MPPM), ABN 26 089 987 388, AFS Licence No. 237506, Level 4, 1 Shelley Street, Sydney, NSW 2000. It contains factual information and general advice only and does not take account of your objectives, financial situation or needs. You should consider whether it is appropriate having regard to your particular circumstances and we recommend you obtain financial, legal and taxation advice before making any financial investment decision. The Individually Managed Account is offered by MPPM. The service is available to wholesale clients only as defined by section 761G of the Corporations Act 2001 (Cth). Funds invested on your behalf by MPPM are not deposits with or other liabilities of Macquarie Bank ABN 46 008 583 542 (MBL), or any other member of the Macquarie Group and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. None of MBL, MPPM, or any other member of the Macquarie Group guarantees any particular rate of return or the performance of the investments, nor do they guarantee the repayment of capital. This document describes the process used to construct a standardised model portfolio; the process used to construct actual client portfolios October differ from this, and will vary from client to client depending on factors such as client risk tolerance, market liquidity, and individual client mandate restrictions and taxation circumstances. Actual performance of investments will depend on factors such as future economic conditions, mandate restrictions (if applicable), liquidity and taxation management. MPPM makes no warranties as to any particular rate of return. Members of the Macquarie Group or their associates, officers or employees ( Macquarie ) October have interests in the financial products referred to in this advice by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender or adviser. Macquarie October receive fees, brokerage or commissions for acting in those capacities. In addition, Macquarie October buy or sell the financial products as principal or agent and as such October effect transactions which are not consistent with any recommendations in this advice. Past performance is no indicator of future performance. 3
Macquarie PPM Core Plus Australian Equity Strategy Overview November 2016 Macquarie Investment Management Market Overview It was a positive month for the Australian equities market despite a surprise US election result early in the month. There were broad based sector gains with Financials and Banks continuing to perform strongly. Healthcare and Telco s were the only sectors to fall short of positive returns. Global equity markets were once again mixed. The US led global performance as markets surged following the election result despite a strong rise in US bond yields. European equities were down as fears of potential political change continued to overhang performance. Commodity markets surged in November with Iron Ore, Copper, Lead, Zinc and Nickel all rallying strongly. The Oil price also rallied after OPEC agreed to cut production by 1.2m barrels per day, driving the Brent Oil price above $50 per barrel. Precious metals were the exception with the price of Gold falling over the month. In company news, Boral entered into a binding agreement to acquire Headwaters Incorporated. South32 announced it has entered into a binding agreement with Peabody to acquire it Metropolitan Colliery and a 16.7 interest in the Port Kembla Coal terminal. Rio Tinto announced a 5 year US$5bn productivity target. Woolworths. Oil Search underperformed due to slower than expected progress on their Gas expansion in PNG. Woolworths also underperformed following the surprise resignation of Big W CEO Sally Macdonald from the business. Outlook Uncertainty and volatility are expected to remain in global markets as investors attempt to price the potential impact of rising rates in the US. Commodity prices remain volatile. The outlook for Oil remains robust driven by stable demand and slowing supply. Select bulk commodities continue to rise aggressively thanks to China stimulus and a variety of supply side constraints. On the stock front, quality stocks that miss on earnings expectations are continuing to come under serious pressure. Conversely, value stocks that deliver in-line have performed strongly in recent months. Whilst the challenge of navigating uncertain markets remains, we continue to believe there are significant opportunities for those that know where to look. In the domestic economy, the Reserve Bank of Australia (RBA) cash rate remained unchanged at 1.50 consistent with sustainable growth in the economy. Consumer sentiment fell surrounding the US election and the volatility in equity markets. Employment data came in below expectations and wages growth has been persistently low. On a positive note, the unemployment rate and participation rate remained unchanged. Portfolio highlights The portfolio returned +3.32 during November, compared to the benchmark which returned +2.99. The largest positive contributors for this month included overweight positions in AGL Energy, and Rio Tinto. AGL Energy outperformed during the month as the company continues to benefit from increased wholesale electricity prices. Rio Tinto also performed well, benefiting from a stronger iron ore price (+17) over the month. Key detractors to performance included overweight positions in Tabcorp Holdings, Oil Search and 1
Core portfolio November 2016 Model portfolio performance, 30 November 2016 1 month 3 months 6 months 1 year (pa) 2 years (pa) 3 years (pa) 5 years (pa) 7 years (pa) 10 years (pa) Since inception 31.03.08 Core Plus strategy 3.32 2.45 3.12 5.98 4.60 4.86 10.43 6.86 N/A 5.78 S&P/ ASX 200 Accumulation Index 2.99 1.26 3.36 10.03 5.88 5.35 10.59 6.76 N/A 4.80 Source: MPPM/Iress Macquarie PPM Core Plus portfolio summary of changes Stock Action Changes made AGL Energy. Added to position 1.0 BHP Billiton Added to position 0.5 Australia and New Zealand Banking Group Added to position 2.0 Brambles Exited position 2.7 CSL Added to position 2.3 QBE Insurance Group Exited 2.8 position TABCORP Holdings Trimmed position 1.0 Tatts Group Trimmed position 1.0 Woodside Petroleum Added to position 1.0 We added to our existing investment in integrated energy/utility company, AGL. In our view AGL offers a solid medium-term earnings growth outlook, driven by rising wholesale domestic energy prices. We added to the existing investment in diversified global mining company, BHP, following a review of our Resources exposure. We have moderated the underweight to the sector following a stabilisation in Chinese growth and subsequent commodity price strength. BHP remains a high quality, low cost producer. We added to the existing investment in major banking group, ANZ, following a review of our bank sector positioning. We have moderated the underweight to the sector following a reasonable bank reporting season. ANZ continues to focus on business restructuring and cost reductions. We exited the holding in global pallet pooling company, BXB, in favour of CSL. We remain cautious about recent management changes at both the CEO and CFO level. We added to the existing position in global biopharmaceutical company, CSL, following a period of share price weakness. CSL continues to hold the low-cost position in the global plasma market. The holding has now moved to an overweight position. We exited the holding in global insurance business, QBE, on risk management grounds. We see potential downside risk to FY17 earnings from lower premium rates and softening LMI. Recent management change in the Australian business also leaves us cautious. We trimmed our material overweight to wagering business, TAH, on risk management grounds, following the proposed merger with TTS. We view the transaction favourably, but note regulatory approvals are yet to be obtained. We trimmed our material overweight to wagering business, TTS, on risk management grounds, following the proposed merger with TAH. We view the transaction favourably, but note regulatory approvals are yet to be obtained. We added to the existing investment in oil and gas producer, WPL, following a review of our Resources exposure. We have moved the WPL holding to an overweight position, given its dependable production outlook and valuation support. 2
Core Plus portfolio November 2016 Model top 10 holdings ASX code Weight BHP 8.98 CBA 7.26 CASH 6.32 CSL 6.19 WES 5.96 AMC 5.63 WBC 5.57 BXB 5.45 JHX 5.38 Sector allocation Sector Portfolio Benchmark () () Consumer discretionary 7.03 2.15 Consumer staples 9.98 3.05 Energy 5.22 1.14 Financials (ex REITS) 30.44-1.51 Healthcare 5.58-0.85 Industrials 5.15-1.73 Information technology 0.00-1.22 Materials 9.16-7.10 Telecommunication services 7.62 2.92 Utilities 7.43 4.93 3
Core Plus portfolio November 2016 If you have any questions, please contact your adviser or our client service team on 1800 501 180. Disclaimer: This document has been prepared by Macquarie Private Portfolio Management (MPPM), ABN 26 089 987 388, AFS Licence No. 237506, Level 4, 1 Shelley Street, Sydney, NSW 2000. It contains factual information and general advice only and does not take account of your objectives, financial situation or needs. You should consider whether it is appropriate having regard to your particular circumstances and we recommend you obtain financial, legal and taxation advice before making any financial investment decision. The Individually Managed Account is offered by MPPM. The service is available to wholesale clients only as defined by section 761G of the Corporations Act 2001 (Cth). Funds invested on your behalf by MPPM are not deposits with or other liabilities of Macquarie Bank ABN 46 008 583 542 (MBL), or any other member of the Macquarie Group and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. None of MBL, MPPM, or any other member of the Macquarie Group guarantees any particular rate of return or the performance of the investments, nor do they guarantee the repayment of capital. This document describes the process used to construct a standardised model portfolio; the process used to construct actual client portfolios may differ from this, and will vary from client to client depending on factors such as client risk tolerance, market liquidity, and individual client mandate restrictions and taxation circumstances. Actual performance of investments will depend on factors such as future economic conditions, mandate restrictions (if applicable), liquidity and taxation management. MPPM makes no warranties as to any particular rate of return. Members of the Macquarie Group or their associates, officers or employees ( Macquarie ) may have interests in the financial products referred to in this advice by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender or adviser. Macquarie may receive fees, brokerage or commissions for acting in those capacities. In addition, Macquarie may buy or sell the financial products as principal or agent and as such may effect transactions which are not consistent with any recommendations in this advice. Past performance is no indicator of future performance. 4
Macquarie PPM Growth Ex-20 Australian Equity Strategy Overview November 2016 Macquarie Investment Management Market Overview It was a positive month for the Australian equities market despite a surprise US election result early in the month. There were broad based sector gains with Financials and Banks continuing to perform strongly. Healthcare and Telco s were the only sectors to fall short of positive returns. Global equity markets were once again mixed. The US led global performance as markets surged following the election result despite a strong rise in US bond yields. European equities were down as fears of potential political change continued to overhang performance. Commodity markets surged in November with Iron Ore, Copper, Lead, Zinc and Nickel all rallying strongly. The Oil price also rallied after OPEC agreed to cut production by 1.2m barrels per day, driving the Brent Oil price above $50 per barrel. Precious metals were the exception with the price of Gold falling over the month. In company news, Boral entered into a binding agreement to acquire Headwaters Incorporated. South32 announced it has entered into a binding agreement with Peabody to acquire it Metropolitan Colliery and a 16.7 interest in the Port Kembla Coal terminal. Rio Tinto announced a 5 year US$5bn productivity target. In the domestic economy, the Reserve Bank of Australia (RBA) cash rate remained unchanged at 1.50 consistent with sustainable growth in the economy. Consumer sentiment fell surrounding the US election and the volatility in equity markets. Employment data came in below expectations and wages growth has been persistently low. On a positive note, the unemployment rate and participation rate remained unchanged. Brexit result. Magellan also performed strongly on the back of strong ongoing net inflow performance. Key overweight detractors to performance at the company level included DuluxGroup and Cochlear. DuluxGroup underperformed despite delivering earnings guidance broadly in line during the month. The share price decline was largely attributable to concerns regarding the growth outlook in the company s Paints and Coatings division. Cochlear also underperformed following concerns regarding increased competition and weaker unit sales growth. Outlook Uncertainty and volatility are expected to remain in global markets as investors attempt to price the potential impact of rising rates in the US. Commodity prices remain volatile. The outlook for Oil remains robust driven by stable demand and slowing supply. Select bulk commodities continue to rise aggressively thanks to China stimulus and a variety of supply side constraints. On the stock front, quality stocks that miss on earnings expectations are continuing to come under serious pressure. Conversely, value stocks that deliver in-line have performed strongly in recent months. Whilst the challenge of navigating uncertain markets remains, we continue to believe there are significant opportunities for those that know where to look. Portfolio highlights The portfolio returned +1.05 during November, compared to the benchmark which returned +0.60. The largest overweight positive contributors for this month included positions in BT Investment Management, Magellan Financial Group and Origin Energy. BT performed strongly during the month following a better than expected earnings result, driven by a recovery in European fund flows post the 1
Growth Ex-20 portfolio November 2016 Growth Ex-20 performance 30 November 2016 1 1 month 3 months 6 months 1 year (pa) 2 years (pa) 3 years (pa) Since inception (pa) 01.08.13 Macquarie PPM Growth Ex- 20 Portfolio 1.05-5.41-5.98 2.13 11.33 10.79 12.53 S&P/ASX 300 Accumulation Index, excluding the S&P/ASX 20 Leaders Index 0.60-3.70 1.62 14.16 12.63 9.78 10.80 Source: MPPM, IRESS Macquarie PPM Growth Ex-20 portfolio summary of changes Stock Action Comment Caltex Australia BlueScope Steel Cleanaway Waste Management Sandfire Resources NL Western Areas Isentia Group MYOB Group Seek New position 2.0 New position 2.8 New position 2.3 New position 2.0 New position 2.0 Exited position 2.6 Exited position 2.9 Trimmed position 1.0 We established a new investment in fuel supplier and convenience retailer, CTX, following a review of the company. CTX holds the dominant positon in the transportation fuels industry in Australia. In our view, its retail expansion strategy combined with disciplined cost management bodes well for medium-term earnings growth. We established a new investment in steel products manufacturer, BSL, following a review of our Resources exposure. We have moderated the underweight to the sector following a stabilisation in Chinese growth and subsequent commodity price strength. BSL offers strong valuation support at current levels. We established a new investment in waste management business, CWY, following a review of the company. The waste management industry offers dependable underlying growth and CWY holds the leading position within the industry. Management are executing on a dual organic growth and cost out strategy. We established a new investment in copper producer, SFR, following a review of our Resources exposure. We have moderated the underweight to the sector following a stabilisation in Chinese growth and subsequent commodity price strength. We established a new investment in nickel producer, WSA, following a review of our Resources exposure. We have moderated the underweight to the sector following a stabilisation in Chinese growth and subsequent commodity price strength. We exited the investment in media intelligence company, ISD, on risk management grounds. While we continues to view the domestic media monitoring business positively, we are cautious regarding the ongoing performance of the King Content business. We exited the investment in accounting software business, MYO, following a review of the company outlook. MYO s cloud customer acquisition and free cash flow have been running below prospectus forecasts, raising some concern regarding the medium-term growth outlook. We have trimmed the material overweight to global online employment classifieds business, SEK, on valuation and risk management grounds. It remains a key holding. 1 Growth Ex-20 Strategy was created and commenced in August 2013, and was approved for inclusion as a strategy available via the Macquarie Individually Managed Account, as and from 12 March 2014. 2
Growth Ex-20 portfolio November 2016 Domino's Pizza Enterprises Inghams Group Caltex Australia Trimmed position 1.0 Exited position 0.5 New position 2.0 We have trimmed the material overweight to global pizza retailer, DMP, on valuation and risk management grounds. It remains a key holding. We exited the modest holding in poultry producer, ING, following its initial public offer. We established a new investment in fuel supplier and convenience retailer, CTX, following a review of the company. CTX holds the dominant positon in the transportation fuels industry in Australia. In our view, its retail expansion strategy combined with disciplined cost management bodes well for medium-term earnings growth. Model top 10 holdings ASX code Weight S32 4.97 AMC 4.77 SYD 4.63 JHX 4.19 TWE 3.76 AGL 3.45 ORG 3.40 COH 3.25 MFG 3.14 Sector allocation Sector Portfolio Benchmark () () Consumer discretionary 13.54 3.51 Consumer staples 3.76 0.33 Energy 7.82 2.71 Financials (ex REITS) 10.99-20.57 Healthcare 9.95 3.42 Industrials 12.34 4.35 Information technology 5.77 3.14 Materials 28.21 10.42 Telecommunication services 0.00-0.92 Utilities 6.32 3.41 3
Growth Ex-20 portfolio November 2016 If you have any questions, please contact your adviser or our client service team on 1800 501 180 Disclaimer: This document has been prepared by Macquarie Private Portfolio Management (MPPM), ABN 26 089 987 388, AFS Licence No. 237506, Level 4, 1 Shelley Street, Sydney, NSW 2000. It contains factual information and general advice only and does not take account of your objectives, financial situation or needs. You should consider whether it is appropriate having regard to your particular circumstances and we recommend you obtain financial, legal and taxation advice before making any financial investment decision. The Individually Managed Account is offered by MPPM. The service is available to wholesale clients only as defined by section 761G of the Corporations Act 2001 (Cth). Funds invested on your behalf by MPPM are not deposits with or other liabilities of Macquarie Bank ABN 46 008 583 542 (MBL), or any other member of the Macquarie Group and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. None of MBL, MPPM, or any other member of the Macquarie Group guarantees any particular rate of return or the performance of the investments, nor do they guarantee the repayment of capital. This document describes the process used to construct a standardised model portfolio; the process used to construct actual client portfolios may differ from this, and will vary from client to client depending on factors such as client risk tolerance, market liquidity, and individual client mandate restrictions and taxation circumstances. Actual performance of investments will depend on factors such as future economic conditions, mandate restrictions (if applicable), liquidity and taxation management. MPPM makes no warranties as to any particular rate of return. Members of the Macquarie Group or their associates, officers or employees ( Macquarie ) may have interests in the financial products referred to in this advice by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender or adviser. Macquarie may receive fees, brokerage or commissions for acting in those capacities. In addition, Macquarie may buy or sell the financial products as principal or agent and as such may effect transactions which are not consistent with any recommendations in this advice. Past performance is no indicator of future performance. 4
Macquarie PPM Growth Australian Equity Strategy Overview November 2016 Macquarie Investment Management Market Overview It was a positive month for the Australian equities market despite a surprise US election result early in the month. There were broad based sector gains with Financials and Banks continuing to perform strongly. Healthcare and Telco s were the only sectors to fall short of positive returns. Global equity markets were once again mixed. The US led global performance as markets surged following the election result despite a strong rise in US bond yields. European equities were down as fears of potential political change continued to overhang performance. Commodity markets surged in November with Iron Ore, Copper, Lead, Zinc and Nickel all rallying strongly. The Oil price also rallied after OPEC agreed to cut production by 1.2m barrels per day, driving the Brent Oil price above $50 per barrel. Precious metals were the exception with the price of Gold falling over the month. In company news, Boral entered into a binding agreement to acquire Headwaters Incorporated. South32 announced it has entered into a binding agreement with Peabody to acquire it Metropolitan Colliery and a 16.7 interest in the Port Kembla Coal terminal. Rio Tinto announced a 5 year US$5bn productivity target. Key overweight detractors to performance at the company level included DuluxGroup, Oil Search and Amcor. Oil Search also underperformed due to slower than expected progress on their Gas expansion in PNG. Amcor also underperformed during the month, largely due to macroeconomic factors which have negatively impacted global industrial growth stocks. Outlook Uncertainty and volatility are expected to remain in global markets as investors attempt to price the potential impact of rising rates in the US. Commodity prices remain volatile. The outlook for Oil remains robust driven by stable demand and slowing supply. Select bulk commodities continue to rise aggressively thanks to China stimulus and a variety of supply side constraints. On the stock front, quality stocks that miss on earnings expectations are continuing to come under serious pressure. Conversely, value stocks that deliver in-line have performed strongly in recent months. Whilst the challenge of navigating uncertain markets remains, we continue to believe there are significant opportunities for those that know where to look. In the domestic economy, the Reserve Bank of Australia (RBA) cash rate remained unchanged at 1.50 consistent with sustainable growth in the economy. Consumer sentiment fell surrounding the US election and the volatility in equity markets. Employment data came in below expectations and wages growth has been persistently low. On a positive note, the unemployment rate and participation rate remained unchanged. Portfolio Highlights The portfolio returned +3.06 during November, compared to the benchmark which returned +2.99. The largest positive overweight contributors for this month included positions in BT Investment Management, AGL Energy and Macquarie Group. BT performed strongly during the month following a better than expected earnings result, driven by a recovery in European fund flows post the Brexit result. AGL Energy outperformed during the month as the company continues to benefit from increased wholesale electricity prices. 1
Growth portfolio November 2016 Model portfolio performance 30 November 2016 1 month 3 months 6 months 1 year (pa) 2 years (pa) 3 years (pa) 5 years (pa) 7 years (pa) 10 years (pa) Since inception 10.04.06 Macquarie PPM Growth Portfolio 3.06-0.43-1.79 2.76 6.50 6.46 13.27 8.89 7.10 7.29 S&P/ASX 200 Accumulation Index 2.99 1.26 3.36 10.03 5.88 5.35 10.59 6.76 4.46 4.88 Source: MPPM, IRESS Macquarie PPM Growth portfolio summary of changes Stock Action Comment AGL Energy. Caltex Australia Cleanaway Waste Management Isentia Group Brambles Motorcycle Holdings Inghams Group New position 4.0 New position 2.6 New position 2.0 Exited position 1.8 Exited position 3.7 Exited position 1.8 Exited 0.4 position We established a new investment in integrated energy/utility company, AGL. In our view AGL offers a solid medium-term earnings growth outlook, driven by rising wholesale domestic energy prices. We established a new investment in fuel supplier and convenience retailer, CTX, following a review of the company. CTX holds the dominant positon in the transportation fuels industry in Australia. In our view, its retail expansion strategy combined with disciplined cost management bodes well for medium-term earnings growth. We established a new investment in waste management business, CWY, following a review of the company. The waste management industry offers dependable underlying growth and CWY holds the leading position within the industry. Management are executing on a dual organic growth and cost out strategy. We exited the investment in media intelligence company, ISD, on risk management grounds. While we continues to view the domestic media monitoring business positively, we are cautious regarding the ongoing performance of the King Content business. We exited the holding in global pallet pooling company, BXB, to moderate our overweight exposure to global industrials (note we also hold AMC, JHX and CSL). Additionally, we remain cautious about recent management changes at both the CEO and CFO level. We exited the investment in accounting software business, MYO, following a review of the company outlook. MYO s cloud customer acquisition and free cash flow have been running below prospectus forecasts, raising some concern regarding the medium-term growth outlook. We exited the modest holding in poultry producer, ING, following its initial public offer. 2
Growth portfolio November 2016 Model top 10 holdings ASX code Weight CBA 10.05 WBC 8.11 ANZ 6.52 BHP 6.25 CSL 4.49 MQG 4.29 CASH 4.27 AGL 4.26 RIO 3.63 Sector allocation Sector Portfolio Benchmark () () Consumer discretionary 5.22 0.34 Consumer staples 2.42-4.51 Energy 5.16 1.09 Financials (ex REITS) 26.41-5.54 Healthcare 8.04 1.61 Industrials 13.55 6.67 Information technology 3.80 2.57 Materials 18.53 2.27 Telecommunication services 0.00-4.70 Utilities 6.08 3.58 3
Growth portfolio November 2016 If you have any questions, please contact your adviser or our client service team on 1800 501 180 Disclaimer: This document has been prepared by Macquarie Private Portfolio Management (MPPM), ABN 26 089 987 388, AFS Licence No. 237506, Level 4, 1 Shelley Street, Sydney, NSW 2000. It contains factual information and general advice only and does not take account of your objectives, financial situation or needs. You should consider whether it is appropriate having regard to your particular circumstances and we recommend you obtain financial, legal and taxation advice before making any financial investment decision. The Individually Managed Account is offered by MPPM. The service is available to wholesale clients only as defined by section 761G of the Corporations Act 2001 (Cth). Funds invested on your behalf by MPPM are not deposits with or other liabilities of Macquarie Bank ABN 46 008 583 542 (MBL), or any other member of the Macquarie Group and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. None of MBL, MPPM, or any other member of the Macquarie Group guarantees any particular rate of return or the performance of the investments, nor do they guarantee the repayment of capital. This document describes the process used to construct a standardised model portfolio; the process used to construct actual client portfolios may differ from this, and will vary from client to client depending on factors such as client risk tolerance, market liquidity, and individual client mandate restrictions and taxation circumstances. Actual performance of investments will depend on factors such as future economic conditions, mandate restrictions (if applicable), liquidity and taxation management. MPPM makes no warranties as to any particular rate of return. Members of the Macquarie Group or their associates, officers or employees ( Macquarie ) may have interests in the financial products referred to in this advice by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender or adviser. Macquarie may receive fees, brokerage or commissions for acting in those capacities. In addition, Macquarie may buy or sell the financial products as principal or agent and as such may effect transactions which are not consistent with any recommendations in this advice. Past performance is no indicator of future performance. 4
Macquarie PPM Income Australian Equity Strategy Overview November 2016 Macquarie Investment Management Market overview It was a positive month for the Australian equities market despite a surprise US election result early in the month. There were broad based sector gains with Financials and Banks continuing to perform strongly. Healthcare and Telco s were the only sectors to fall short of positive returns. Global equity markets were once again mixed. The US led global performance as markets surged following the election result despite a strong rise in US bond yields. European equities were down as fears of potential political change continued to overhang performance. Commodity markets surged in November with Iron Ore, Copper, Lead, Zinc and Nickel all rallying strongly. The Oil price also rallied after OPEC agreed to cut production by 1.2m barrels per day, driving the Brent Oil price above $50 per barrel. Precious metals were the exception with the price of Gold falling over the month. In company news, Boral entered into a binding agreement to acquire Headwaters Incorporated. South32 announced it has entered into a binding agreement with Peabody to acquire it Metropolitan Colliery and a 16.7 interest in the Port Kembla Coal terminal. Rio Tinto announced a 5 year US$5bn productivity target. In the domestic economy, the Reserve Bank of Australia (RBA) cash rate remained unchanged at 1.50 consistent with sustainable growth in the economy. Consumer sentiment fell surrounding the US election and the volatility in equity markets. Employment data came in below expectations and wages growth has been persistently low. On a positive note, the unemployment rate and participation rate remained unchanged. Key overweight detractors to performance at the company level included Tabcorp Holdings, Inghams Group and Woolworths. Inghams Group disappointed over the month, with the share price falling following its initial public offering on 7 th November. Woolworths also underperformed following the surprise resignation of Big W CEO Sally Macdonald from the business. Outlook Uncertainty and volatility are expected to remain in global markets as investors attempt to price the potential impact of rising rates in the US. Commodity prices remain volatile. The outlook for Oil remains robust driven by stable demand and slowing supply. Select bulk commodities continue to rise aggressively thanks to China stimulus and a variety of supply side constraints. On the stock front, quality stocks that miss on earnings expectations are continuing to come under serious pressure. Conversely, value stocks that deliver in-line have performed strongly in recent months. Whilst the challenge of navigating uncertain markets remains, we continue to believe there are significant opportunities for those that know where to look. Portfolio highlights The portfolio returned +3.79 during November, compared to the benchmark which returned +2.90. The largest positive overweight contributors for this month included positions in AGL Energy, Macquarie Atlas Roads and Chorus. AGL Energy outperformed during the month as the company continues to benefit from increased wholesale electricity prices. Chorus contributed positively to performance as the company continued the rollout of fibre across New Zealand. The company is benefiting from increased financial flexibility following recent debt issuances into the European and New Zealand markets. 1
Income Portfolio November 2016 Model portfolio performance, 30 November 2016 1 month 3 months 6 months 1 year (pa) 2 years (pa) 3 years (pa) 5 years (pa) 7 years (pa) 10 years (pa) Since inception 30.04.04 Income strategy 3.79 2.60 3.20 5.44 5.01 5.88 12.96 8.39 5.35 8.06 S&P/ ASX 200 Industrials Accumulation Index (XJIAI) 2.90-0.39 0.55 6.42 7.04 7.51 14.99 10.11 5.64 8.95 Source: MPPM, IRESS Macquarie PPM Income portfolio summary of changes Stock Action Changes made AGL Energy. Australia and New Zealand Banking Group Macquarie Atlas Roads Group Fairfax Media Added to position 0.5 Added to position 2.0 New position 2.2 New position 2.0 Chorus New position 1.0 Perpetual QBE Insurance Group TABCORP Holdings Tatts Group Exited position 2.7 Exited position 3.3 Trimmed position 2.0 Trimmed position 1.5 We added to our existing investment in integrated energy/utility company, AGL. In our view AGL offers a solid medium-term earnings growth outlook, driven by rising wholesale domestic energy prices. We added to the existing investment in major banking group, ANZ, following a review of our bank sector positioning. We have moderated the underweight to the sector following a reasonable bank reporting season. ANZ continues to focus on business restructuring and cost reductions. We established a new investment in toll road operator, MQA, on valuation grounds, following the recent de-rate in infrastructure securities. MQA offers strong medium-term distribution growth, as it rolls off high interest bearing debt. We established a new investment in media company, FXJ, on valuation grounds, following recent share price weakness. We believe the Domain real estate classifieds business remains the key growth engine of FXJ and will offset the structural weakness in its traditional publishing assets. We established a new investment in NZ telecommunications infrastructure owner, CNU, following a review of the yield exposures in the portfolio. CNU is currently rolling out the fibre network in NZ. As CNU s capex winds down in the coming years, we expect strong free cash flow generation and hence strong medium-term dividend growth. We exited the investment in funds management business, PPT, following a review of the yield exposures within the portfolio. We see greater dividend volatility moving forward, given the link through to underlying equity markets and PPT s high payout ratio. We exited the holding in global insurance business, QBE, on risk management grounds. We see potential downside risk to FY17 earnings from lower premium rates and softening LMI. Recent management change in the Australian business also leaves us cautious. We have trimmed our material overweight to wagering business, TAH, on risk management grounds, following the proposed merger with TTS. We view the transaction favourably, but note regulatory approvals are yet to be obtained. We have trimmed our material overweight to wagering business, TTS, on risk management grounds, following the proposed merger with TAH. We view the transaction favourably, but note regulatory approvals are yet to be obtained. 2
Income Portfolio November 2016 Model top 10 holdings ASX code Weight WBC 9.62 CBA 9.60 TLS 8.51 NAB 7.62 ANZ 7.11 WES 5.32 CASH 4.86 WOW 4.64 AGL 4.61 Sector allocation Sector Portfolio Benchmark () () Consumer discretionary 7.80 1.97 Consumer staples 11.77 3.49 Energy 0.00 0.00 Financials (ex REITS) 42.18 4.02 Healthcare 0.00-7.68 Industrials 7.26-0.96 Information technology 0.00-1.46 Materials 0.00-4.85 Telecommunication services 9.59 3.98 Utilities 9.44 6.46 3
Income Portfolio November 2016 If you have any questions, please contact your adviser or our client service team on 1800 501 180 Disclaimer: This document has been prepared by Macquarie Private Portfolio Management (MPPM), ABN 26 089 987 388, AFS Licence No. 237506, Level 4, 1 Shelley Street, Sydney, NSW 2000. It contains factual information and general advice only and does not take account of your objectives, financial situation or needs. You should consider whether it is appropriate having regard to your particular circumstances and we recommend you obtain financial, legal and taxation advice before making any financial investment decision. The Individually Managed Account is offered by MPPM. The service is available to wholesale clients only as defined by section 761G of the Corporations Act 2001 (Cth). Funds invested on your behalf by MPPM are not deposits with or other liabilities of Macquarie Bank ABN 46 008 583 542 (MBL), or any other member of the Macquarie Group and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. None of MBL, MPPM, or any other member of the Macquarie Group guarantees any particular rate of return or the performance of the investments, nor do they guarantee the repayment of capital. This document describes the process used to construct a standardised model portfolio; the process used to construct actual client portfolios may differ from this, and will vary from client to client depending on factors such as client risk tolerance, market liquidity, and individual client mandate restrictions and taxation circumstances. Actual performance of investments will depend on factors such as future economic conditions, mandate restrictions (if applicable), liquidity and taxation management. MPPM makes no warranties as to any particular rate of return. Members of the Macquarie Group or their associates, officers or employees ( Macquarie ) may have interests in the financial products referred to in this advice by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender or adviser. Macquarie may receive fees, brokerage or commissions for acting in those capacities. In addition, Macquarie may buy or sell the financial products as principal or agent and as such may effect transactions which are not consistent with any recommendations in this advice. Past performance is no indicator of future performance. 4
Macquarie PPM REIT Strategy Overview November 2016 Macquarie Investment Management Market Overview The S&P/ASX 200 A-REIT (TR) index returned 0.8 in November, below the S&P/ASX 200, which was up 3.0. Year to date, the REIT sector has returned 5.3, outperforming the market by 2.6. Globally, REITs returned 2.2 this month (USD terms) and 2.4 year to date. Bond yields rose during the month, with the Australian government 10-year bond yield rising to 2.73. It was a positive month for the Australian equities market despite a surprise US election result early in the month. There were broad based sector gains with Financials and Banks continuing to perform strongly. Healthcare and Telcos were the only sectors to fall short of positive returns. Global equity markets were once again mixed. The US led global performance as markets surged following the election result despite a strong rise in US bond yields. European equities were down as fears of potential political change continued to overhang performance. Commodity markets surged in November with Iron Ore, Copper, Lead, Zinc and Nickel all rallying strongly. The Oil price also rallied after OPEC agreed to cut production by 1.2m barrels per day, driving the Brent Oil price above $50 per barrel. Precious metals were the exception with the price of Gold falling over the month. In company news, Boral entered into a binding agreement to acquire Headwaters Incorporated. South32 announced it has entered into a binding agreement with Peabody to acquire its Metropolitan Colliery and a 16.7 interest in the Port Kembla Coal terminal. Rio Tinto announced a 5 year US$5bn productivity target. In the domestic economy, the Reserve Bank of Australia (RBA) cash rate remained unchanged at 1.50 consistent with sustainable growth in the economy. Consumer sentiment fell surrounding the US election and the volatility in equity markets. Employment data came in below expectations and wages growth has been persistently low. On a positive note, the unemployment rate and participation rate remained unchanged. Portfolio Highlights The portfolio returned +0.35 during November, compared to the benchmark which returned +0.84. The largest positive overweight contributors for this month included positions in Dexus Property Group and GPT Group. Dexus Property Group outperformed over the month due to continued strength in Sydney office leasing conditions. Key overweight detractors to performance at the company level included Viva Energy REIT Ltd, Goodman Group and Stockland Corporation Ltd. Stockland underperformed as it has been caught up in the negative headlines surrounding housing prices. Outlook With the sector trading at approximately -5.0 discount to NAV and 16.4x forward earnings, we believe the sector is still attractive. The average DPU yield of 5.2 is 2.5 greater than the 10 yr bond yield (currently 2.7). We continue to feel the sector is well positioned to take advantage of any opportunities that arise and feel their stable (and growing) yield offers an attractive investment in the current low growth, low interest rate world. Despite the strong run, we see good value in the sector. 1
REIT portfolio November 2016 Model portfolio performance 30 November 2016 1 month 3 months 6 months 1 year (pa) 2 years (pa) 3 years (pa) 5 years (pa) 7 years (pa) 10 years (pa) Since inception 30.04.04 REIT strategy 0.35-10.68-4.70 11.28 13.11 15.27 16.02 11.92-0.29 3.43 S&P/ASX 200 REIT Index 0.84-11.10-5.66 10.18 12.50 14.93 16.37 12.09 0.48 4.24 Source: MPPM, IRESS Macquarie PPM REIT portfolio summary of changes Stock Action Changes made There were no changes in November Model top 10 holdings ASX code Weight () SCG 18.65 WFD 12.58 GMG 12.55 SGP 11.65 CASH 10.26 DXS 9.80 GPT 8.04 VCX 5.95 MGR 5.67 VVR 2.45 2
REIT portfolio November 2016 If you have any questions, please contact your adviser or our client service team on 1800 501 180. Disclaimer: This document has been prepared by Macquarie Private Portfolio Management (MPPM), ABN 26 089 987 388, AFS Licence No. 237506, Level 4, 1 Shelley Street, Sydney, NSW 2000. It contains factual information and general advice only and does not take account of your objectives, financial situation or needs. You should consider whether it is appropriate having regard to your particular circumstances and we recommend you obtain financial, legal and taxation advice before making any financial investment decision. The Individually Managed Account is offered by MPPM. The service is available to wholesale clients only as defined by section 761G of the Corporations Act 2001 (Cth). Funds invested on your behalf by MPPM are not deposits with or other liabilities of Macquarie Bank ABN 46 008 583 542 (MBL), or any other member of the Macquarie Group and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. None of MBL, MPPM, or any other member of the Macquarie Group guarantees any particular rate of return or the performance of the investments, nor do they guarantee the repayment of capital. This document describes the process used to construct a standardised model portfolio; the process used to construct actual client portfolios October differ from this, and will vary from client to client depending on factors such as client risk tolerance, market liquidity, and individual client mandate restrictions and taxation circumstances. Actual performance of investments will depend on factors such as future economic conditions, mandate restrictions (if applicable), liquidity and taxation management. MPPM makes no warranties as to any particular rate of return. Members of the Macquarie Group or their associates, officers or employees ( Macquarie ) October have interests in the financial products referred to in this advice by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender or adviser. Macquarie October receive fees, brokerage or commissions for acting in those capacities. In addition, Macquarie October buy or sell the financial products as principal or agent and as such October effect transactions which are not consistent with any recommendations in this advice. Past performance is no indicator of future performance. 3