• Click to edit Master text styles – Second level

• Third level – Fourth level Global credit and fixed income market update

Teleconference 18 September 2014

Opportunities and risks in a low interest rate environment

1 1

Disclaimer

The information contained in this presentation is current as at the date of this presentation unless otherwise specified and is provided by Bentham Asset Management ABN 92 140 833 674 AFSL 356199 (‘Bentham’). The information is intended solely for holders of an Australian Financial Services Licence or other wholesale clients as defined in the Corporations Act 2001 (Cth). It must not be passed on to a retail client. It should be regarded as general information only rather than advice. A reference to any security is not a recommendation to buy. It has been prepared without taking account of any person’s objectives, financial situation or needs. Because of that, each person should, before acting on such information, consider its appropriateness, having regard to their objectives, financial situation and needs.

Offers of interests in the Bentham Wholesale Global Income Fund ARSN 105 898 271, Bentham Professional Global Income Fund ARSN 109 991 095, Bentham Wholesale Syndicated Loan Fund ARSN 110 077 159, Bentham Professional Syndicated Loan Fund ARSN 111 433 071 and Bentham Wholesale High Yield Fund ARSN 088 907 224 are contained in the relevant Product Disclosure Statement issued by Fidante Partners Services Limited ABN 44 119 605 373 AFSL 320 505 which is available at www.fidante.com.au and must be considered before making a decision about the product.

Past performance is not necessarily indicative of future performance. Returns may be volatile and may vary from year to year.

Agenda

• What Has Happened to Market Returns Over the Past Year?

• Market Themes and Outlook

• Credit Market Discussion

• Portfolio Positioning and Construction

• Bentham Global Income Fund Returns and Summary

• Questions

2

Multi Credit Strategy. A diversified income fund Aims to outperform benchmark over rolling 3 years Australian and global credit markets with a minimum 50% Investment Grade 50% UBSA Bank Bill Index, 50% UBSA Composite Bond Index Half the duration of the Australian Fixed Interest index Monthly at a target fixed rate of 5.25% NAV for FY 2015 0.72% Management Fee + 0.05% Estimated Reimbursable Expenses. No Performance Fee

Philosophy: Performance Target: Investment Universe: Benchmark: Benchmark Duration: Target Distributions: Fees:

Global Income Fund – Overview

As at 30 June 2014

3

Risk Control Guideline Actual Credit Quality > 50% investment grade 57.7% investment grade (WARF BBB-) Equity Delta Max of 0.30 0.02 Max in Equity Securities 10% Equity Securities 0.0% Max in High Yield 30% High Yield 2.6% Max in Australia Hybrids 50% Australian Hybrids 0.5%

Portfolio Structure Max in Global Hybrids (Euro CBs) 40% Global Hybrids (Euro CBs) 1.5%

Max in Syndicated Loans 50% Syndicated Loans 35.0% Max in High Grade Bonds 75% High Grade Bonds 39.4% Max in Cash 30% Cash 15.2% Derivatives 5.8%

4 4

What Has Happened to Market Returns Over the Past Year?

5 5

One Year Return and Risk Some fixed interest assets were more volatile than others…

Sources: Barclay's Capital, Bentham, BoA Merrill Lynch, Bloomberg, Credit Suisse, JP Morgan, Morgan Stanley & UBS. After-Fee Returns are calculated using pre-distribution month end withdrawal unit prices, and assumes all income is reinvested in additional units. Past performance is not a reliable indicator of future performance. As at 31-Aug-2014.

6 6

Interest Rate Risk for One Year Market Risk

Higher duration has delivered more volatility over the past year

Sources: Barclay's Capital, Bentham, BoA Merrill Lynch, Bloomberg, Credit Suisse, JP Morgan, Morgan Stanley & UBS. After-Fee Returns are calculated using pre-distribution month end withdrawal unit prices, and assumes all income is reinvested in additional units. Past performance is not a reliable indicator of future performance. As at 31-Aug-2014.

7 7

Long Term Returns (p.a.)

The Global Income Fund celebrated its 10-year anniversary in 2013 The Syndicated Loan Fund celebrated its 10-year anniversary in 2014 The High Yield Fund celebrated its 15-year anniversary in 2013

Returns (p.a.) as at 31-8-20141 Year 2 Year 3 Year 4 Year 5 Year 7 Year 10 Year 15 Year

Bentham Funds (after fees p.a.)Bentham Global Income Fund 9.0% 12.9% 11.6% 11.9% 14.5% 8.7% 8.2%Bentham Syndicated Loan Fund 7.9% 9.7% 10.6% 10.5% 12.1% 9.1%Bentham High Yield Fund 11.1% 11.7% 12.8% 13.1% 15.1% 11.3% 10.3% 9.2%

Index Returns (before fees p.a.)Australian Bank Bills 2.7% 2.9% 3.4% 3.8% 3.9% 4.5% 5.0% 5.1%Australian Fixed Interest 6.9% 4.6% 6.2% 6.4% 6.9% 7.0% 6.4% 6.5%Global Govt Bonds 9.0% 5.7% 7.1% 6.8% 7.8% 8.1% 7.5% 7.7%US IG Corporate Bonds 11.8% 6.2% 8.9% 8.7% 10.4% 10.4% 8.2% 8.9%Emerging Market Bonds 16.3% 5.0% 8.7% 9.6% 12.3% 12.3% 10.9% 12.9%Australian Property Trusts 19.7% 18.1% 19.3% 13.4% 11.9% -4.2% 2.6% 6.3%Australian Equities 14.4% 19.2% 14.5% 11.2% 9.3% 3.0% 9.4% 9.1%World Equities (Unhedged AUD) 16.0% 26.2% 21.6% 14.5% 10.6% 2.6% 5.2% 2.2%World Equities (Hedged AUD) 24.2% 22.9% 18.4% 18.3% 15.4% 5.7% 9.5% 6.0%

Past performance is no indication of future performance. Sources: Bentham, Bloomberg, Challenger and JP Morgan

* Bentham Fund returns are after fees. After-Fee Returns are calculated using pre-distribution month end withdrawal unit prices, and assumes all income is reinvested in additional units.

Past Volatility and Historical Returns

8

Asset class historical performance

Past Volatility and Future Yields

9

The current yield environment is very different to history

10 10

Forward Looking Investment Yields Credit spread is required to generate yields above inflation target

11 11

Market Themes and Outlook

Interest rates at historic lows

12

Bubble? Three sell-offs in the last 25 years is not a lot. But current starting point is lower…

Returns in rising interest rate

13

Calendar Year Total Returns (AUD Hedged, Annual Returns)31-Dec-94 31-Dec-99 31-Dec-09 Average

Start of year Aus 5yr bond yield 6.18 4.74 3.41End of year Aus 5yr bond yield 10.05 6.68 5.17Change in Aussie 5yr bond yield +3.87 +1.94 +1.75 +2.52

Start of year U.S. 5yr bond yield 5.21 4.54 1.55End of year U.S. 5yr bond yield 7.83 6.34 2.68Change in U.S. 5yr bond yield +2.62 +1.80 +1.13 +1.85

Australian Bank Bills 5.4% 5.0% 3.5% 4.6%Syndicated Loans 11.2% 4.3% 48.0% 21.2%US High Yield Bonds -0.1% 2.8% 57.0% 19.9%Australian Fixed Interest -4.7% -1.2% 1.7% -1.4%Australian Inflation Linked Bonds -9.5% 2.5% 0.4% -2.2%Global Govt Bonds -2.8% 0.2% 3.6% 0.3%US IG Corporate Bonds -3.0% -2.5% 21.6% 5.4%Emerging Market Bonds -18.3% 24.7% 28.0% 11.5%Australian Property Trusts -7.1% -4.7% 7.9% -1.3%Australian Equities -8.8% 18.7% 37.0% 15.7%World Equities (Unhedged AUD) -7.5% 17.8% 2.4% 4.2%

Interest rates are very low. Very few signposts for impact of rising rates. Few assets do well as most are sensitive to interest rate changes.

Bond Risk Premiums Relative to FOMC Inflation Targets

14

Government bond yields provide historically low premium to inflation target

FOMC Individual Member Fed Fund Rate Forecasts

15

Forward yield “dots” are the FOMC individual fed fund rate forecasts – higher than market forward rates

A tale of two nations

16

US unemployment is trending lower, while Australian unemployment is rising

Suggests further attempts to stimulate employment through monetary policy may be inflationary

17 17

US job openings data

18 18

Credit Market Discussion

19 19

Yield versus Interest rate risk (M.duration) Where do we sit in the current yield curve?

20 20

Historical Credit Spreads – Multi-Sector Comparison Loans spreads remain elevated while EMD spreads can be volatile

US Loans are floating rate instruments with a discount margin

21

• Discount margin to maturity was more conservative (during 2008).

• Now 3 year discount margin is more conservative.

Loans spreads remain elevated – above historical median

Implied default rates (Constant Default Rate)

22

Loans spreads provide buffer against expected default rates

23

US High Yield – Interest Rate Yield and Credit Spread Yield in USD of US High Yield dragged down by Treasuries

24 24

Relative Growth in Capital Market Sectors Growth in EMD market far outstrips other capital market sectors

Source: Bentham, Bloomberg, CS and Barclays. As at 31-Jul-14

Recap of Market Outlook

• Key credit sector outlook:

• Moody’s default outlook remains benign in the near-term.

• Leveraged loans still offer value.

• De-gearing of banks positive for bank capital securities.

• High yield bonds appear fully priced.

• US economic recovery is becoming sustainable.

• US to normalise short-term interest rates.

• European countries still face limits to growth.

• EMD concerns as central banks tighten and QE reverses.

• China to moderate with slower growth.

• Australia adjusting from commodities to housing and infrastructure.

25

Active management will remain key in coming years

26 26

Portfolio Positioning and Construction

Global Income Fund – Historical Sector Allocation

27

Global Income Fund – Sector Allocation Changes as at Aug-2014

28

31-Aug-14 31-Aug-13 31-Aug-12 Allocation Allocation Allocation

Equity Securities 0.0% -0.6% -0.6% 0.0% 0.6% 0.6%Global High Yield Bonds -0.3% -2.3% -7.9% 2.4% 4.7% 10.3%European Convertibles -0.2% -1.5% -2.0% 1.4% 2.9% 3.4%Global Syndicated Loans 3.1% 6.2% 2.7% 35.8% 29.6% 33.1%Domestic Hybrids -0.1% -0.3% -0.6% 0.4% 0.7% 1.0%Capital Securities -0.3% -2.5% 2.1% 18.0% 20.5% 15.9%Collateralised Loan Obligations 1.8% -4.2% -2.9% 19.4% 23.7% 22.3%Corporate Investment Grade -0.1% -0.1% -1.0% -2.5% -2.4% -1.5%Residential Mortgage Backed Securities -0.5% -1.8% -2.7% 3.6% 5.4% 6.3%Government Backed Bonds - - - 0.0% 0.0% 0.0%Cash -1.7% 5.1% 12.3% 15.9% 10.8% 3.6%Derivatives -1.1% 3.6% -1.7% -2.9% -6.6% -1.2%Basis Trades -0.7% -1.6% 2.4% 8.5% 10.0% 6.1%Total 100.0% 100.0% 100.0%Source: Bentham Asset Management

3 Month Change

12 Month Change

24 Month Change

Credit Sector Allocations

Investment Process – Duration Management (Historical)

29 Source: Bentham As at 31-Aug-14

Bentham actively manages interest rate duration within the Global Income Fund

GIF Duration Charts by Currency – 2 years to 31-Aug-2014

30

Interest rate duration is managed separately for each currency

Top 10 Company Exposures Exposure by Debt Seniority Portfolio Summary StatsIssuer Name (ex cash & derivatives) % of Port % of PortGranite Master UK RMBS 1.9% Cash 21.5% Yield to Maturity (%) 6.38 Atrium CLO 1.9% Derivative 7.0% Running Yield (%) 5.18 National Australia Bank 1.8% Asset Backed Security 24.2% Credit Spread (yield above risk free) (%) 2.62 QBE Insurance Group 1.6% Senior Secured 25.3% Credit Spread - Modified Duration 4.58 Greenbriar CLO 1.5% Senior Subordinate 0.4% Interest Rate - Modified Duration -0.71Royal Bank Of Scotland Group 1.4% Senior Unsecured 2.2% Weighted Average Life (years) 11.48 Rams RMBS 1.3% Subordinated 10.9% Number of Issuers 621 HSBC Holdings PLC 1.2% Preferred Security 8.5% TW WARF Rating Equiv BBB-Aviva Plc 1.2% Equity 0.1% Libor Floors 25.3%St Pauls CLO III Ltd 1.2%

15.1% Maturity ProfileExposure by Split Rating % of Port

Top 10 Industry Exposures % of Port 0 to 1 years 10.5%Moody's SIC (ex cash & derivatives) % of Port Cash 17.0% 1 to 3 years 2.0%Banking 11.4% Derivative 5.7% 3 to 5 years 22.8%Insurance 7.2% AAA 0.7% 5 to 7 years 22.2%Electronics 4.9% AA 3.1% 7 to 10 years 14.9%Healthcare, Education and Childcare 4.7% A 5.8% > 10 years 27.6%Telecommunications 4.7% BBB 21.8%RMBS 4.0% Split BBB 3.7% 57.7% Regional Exposures (ex cash and derivatives)Broadcasting and Entertainment 3.7% BB 11.7% % of PortChemicals, Plastics and Rubber 3.5% Split BB 6.2% Cash & Derivatives 22.7%Finance 3.4% B 19.6% Americas 40.6%CLO 3.3% Split B 1.3% Australia & NZ 11.1%

50.8% NR 2.5% Europe & UK 24.8%CCC/Split CCC 1.1% Asia-x-Japan 0.5%Distressed/Default 0.0% Africa & Middle East 0.3%Total 100.0% Other 0.0%

Global Income Fund – Risk Statistics as at 30-June-2014

31

Highly diverse credit portfolio: 621 issuers Low interest rate sensitivity: -0.71 yr duration Attractive yield to maturity: 6.38% (in A$) High allocation to senior secured & asset backed: ~50%

Geographic Diversity (fully hedged to A$)

• Bentham GIF focuses on credit sectors where we see value: • Bias towards offshore opportunities;

• higher credit spreads • very little interest rate risk • benefit from early repayment, and • improving credit quality.

• Most favoured sectors : loans, capital securities & CLOs. • Less favoured sectors : high yield, investment grade corporates & convertibles.

• Bentham GIF has flexibility to actively manage interest rate risk: • Interest rate duration managed independently of credit risk. • Active interest rate risk management across currencies.

• More defensive positioning within GIF: • Focus on large, liquid and rated global credit sectors. • Ongoing tail risk hedging. • Cash holding increased.

32

Bentham Global Income Fund Positioning & Risk Management Risk management remains key

33 33

Bentham Global Income Fund Returns and Summary

34

Bentham Global Income Fund – Returns (Post Fee)

*Benchmark is 50% UBSA Composite Bond Index and 50% UBSA Bank Bill Index. Source: Challenger, Bloomberg. After-Fee Returns are calculated using pre-distribution month end withdrawal unit prices, and assumes all income is reinvested in additional units. Past performance is not a reliable indicator of future performance. Returns may be volatile and may vary from year to year. As at 31-Aug-2014.

35

Bentham Global Income Fund – Monthly Distribution History

Distribution as a % of NAV*Financial

YearJul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Year **

FY2015 0.44 0.43 0.86FY2014 0.50 0.49 0.50 0.49 0.50 0.49 0.50 0.50 0.50 0.50 0.50 0.07 5.94FY2013 0.68 0.64 0.64 0.64 0.64 0.62 0.65 0.62 0.61 0.61 0.62 1.05 9.09FY2012 0.78 0.77 0.77 0.63 0.60 0.62 0.69 0.68 0.68 0.67 0.66 1.05 8.39FY2011 0.64 0.63 0.64 0.65 0.64 0.64 0.64 0.82 0.80 0.79 0.80 1.08 9.87FY2009 0.64 0.66 0.84 0.58 0.48 0.36 0.37 0.32 0.26 0.28 0.26 0.28 4.52FY2008 0.52 0.50 0.54 0.58 0.57 0.57 0.59 0.59 0.60 0.66 0.67 4.45 10.13FY2007 0.50 0.48 0.50 0.50 0.50 0.50 0.54 0.54 0.46 0.44 0.53 0.62 6.34FY2006 0.00 0.00 0.93 0.00 0.00 0.76 0.47 0.47 0.43 0.47 0.47 2.49 0.00FY2005 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.76 0.00 0.00 2.49 0.00FY2004 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 7.20 0.00

* Calculated as the CPU distribution at month end divided by the ex ‑distribution NAV at the start of the month.

Past distributions are no indication of future distributions. Source: Fidante Partners.

** Annual Distribution Returns = Total Return minus Growth Return. Total Returns are calculated using pre-distribution month end withdrawal unit prices, and assumes all income is reinvested in additional units. Growth Return equals the percentage change in the unit Price.

36 36

Questions?