Market and Economic ReviewMarch saw unprecedented moves in financial markets as investors continued to grapple with the COVID-19 outbreak and its impact on global economies. Despite defensive positioning across our funds, we were not immune to the moves and Fund returns were impacted by these falls in global equity and credit markets.

The rapid global spread of the virus has seen governments restrict movement of people and curtail economic activity. To help bridge the gap in growth, governments globally have embarked on large (around 10% of GDP and growing) fiscal stimulus measures, for example compensating workers for lost wages. This will require funding via government debt and central banks have stepped in with programmes to buy that debt as well as ensuring funding is available for companies facing an unexpected loss in revenue.

All of this has occurred over an extremely short period of time. The result has been an extraordinary amount of volatility in all markets as investors evaluate the ramifications of the crisis for various assets and reprice them accordingly.

Our early assessment of the situation in February meant Milford funds entered March with significantly defensive positions. Generally, these comprised high cash holdings and reduced exposure to company bonds and shares. Despite this, our Funds have suffered falls as assets of all kinds have been sold by investors trying to raise cash. Details on each Fund’s performance in the month can be found in the individual fund commentaries.

We continue to position the Funds appropriately for the outlook and a defensive position remains justified given the ongoing uncertainty, particularly with regards to how long we will have to constrain the movement of people. However, we also look ahead to identify good investments for the medium term. On this front the repricing lower in high-quality corporate bonds has offered some attractive opportunities.

It is clear that the short-term outlook remains very uncertain, and that some parts of the economy will feel the effects of the coronavirus well after the immediate threat has passed. Milford’s investment team is working to stay on top of the rapidly evolving landscape and position the Funds accordingly.

Milford KiwiSaver Plan Monthly ReviewApril 2020

Milford Asset ManagementW milfordasset.com

T 0800 662 346E info@milfordasset.com

Level 28, 48 Shortland StreetAuckland 1010, New Zealand

PO Box 960, Shortland StreetAuckland 1140, New Zealand

Milford KiwiSaver Plan Monthly Review as at 31 March 2020

Actual investment mix 1

Effective Cash#

34.25%New Zealand FixedInterest 24.47%International FixedInterest 34.37%

International Equities3.79%Listed Property 1.53%

Other* 0%

KiwiSaver Conservative FundPortfolio Manager: Paul Morris

The COVID-19 fallout precipitated unprecedented volatility across the markets into which the Fund invests, in many cases more extreme than during the Global Financial Crisis. Bond and share valuations adjusted over an extremely short timeframe to a swift deterioration in the economic situation. In such a unique backdrop there were few safe havens as bonds (including many government bonds) and shares both fell. Therefore, irrespective of entering the month with a very cautious setting (less shares, less lower rated bonds and more cash), it transpired Fund positioning was not defensive enough and it lost a disappointing 5.0% in March (but remains up 1.7% over 1 year).

Positively, policy responses from governments (fiscal stimulus) and central banks (quantitative easing/bond buying, rate cuts and much more) have somewhat stabilised markets but we remain wary of the huge uncertainty ahead. Cognisant of the Fund’s conservative risk profile, during the month we continued to focus on limiting more capital losses, reducing further the exposure to lower rated bonds and shares.

Looking forward, until there is more clarity as to the duration and impact of the shutdown the bar is reasonably high to materially add to the Fund’s risk settings. There are however some lower risk opportunities which the Fund may consider, such as attractively priced high-quality bonds which benefit from the support of central bank buying.

KiwiSaver Balanced FundPortfolio Manager: Mark Riggall

Fund performance was impacted significantly in March by the COVID-19 outbreak and associated market volatility. Increasing risks from the outbreak and strong markets allowed the Fund to reduce exposures in mid-February. At the beginning of March, exposure to company shares and bonds was 21% lower than a month prior. This defensive stance helped cushion the Fund from the volatility in March. Disappointingly, the Fund still lost 9.1% in the month, leaving 1-year returns at -0.2%.

In the last month investors have been assessing the outbreak, its economic impact and responses by governments in a very short period of time. This has resulted in rapid declines in the prices of all assets. The Fund’s exposure to listed property was particularly hard hit given that many commercial and retail buildings are closed to tenant entry. Corporate bonds also fell sharply as many investors fear companies will not be able to repay their debt. The outlook for property remains uncertain and consequently we continued to reduce this exposure over the month. On the other hand, good quality corporate bonds have offered some attractive opportunities given the high levels of government support around the world.

The very uncertain outlook warrants a continued cautious stance by the Fund with share exposure remaining significantly below neutral. Uncertainty over the duration of economic disruption remains the key concern for us as investors. Looking ahead, the biggest opportunities for the Fund will be in understanding which companies are best placed to weather the outbreak and investing in these at attractive prices, something the Fund is well placed to take advantage of.

Effective Cash#

36.35%New Zealand FixedInterest 7.32%International FixedInterest 15.61%New Zealand

Equities† 9.53%

Australian Equities3.12%International Equities23.53%Listed Property 4.54%

Other* 0%

†Includes unlisted equity holdings of 0.27% *Other includes currency derivatives used to manage foreign exchange risk.1The actual investment mix incorporates the notional exposure value of equity derivatives and credit default swaps, where applicable.

New Zealand Equities1.59%

# The actual cash held by the Fund is 16.15%. Effective Cash reported above is adjusted to reflect the Fund's notional positions (e.g. derivatives used to increase or reduce market exposure).

# The actual cash held by the Fund is 17.76%. Effective Cash reported above is adjusted to reflect the Fund's notional positions (e.g. derivatives used to increase or reduce market exposure).

Milford KiwiSaver Plan Monthly Review as at 31 March 2020

Actual investment mix 1

Effective Cash#

27.81%New Zealand FixedInterest 1.88%International FixedInterest 14.01%New Zealand

Equities‡ 20.74%

Australian Equities6.31%International Equities23.95%Listed Property 5.30%

Other* 0%

KiwiSaver Active Growth FundPortfolio Manager: Jonathan Windust

The Fund fell 12.0% in March and was negatively impacted by sharp falls in share markets with NZ, Australian and US share markets ending down 13.0%, 20.7% and 12.8% respectively. Share markets fell in response to the continued spread of the coronavirus across the globe and the negative impact on economic growth and company earnings from virus containment measures.

Bond markets were also negatively impacted as investors became more cautious and looked to raise cash levels. We were disappointed with the level of performance of the Fund given our defensive positioning and higher levels of cash - approximately 12%. Areas of relative weakness included our bias towards corporate bonds, real estate, small companies and Australia which were all particularly weak. Medium-term these parts of the market have provided strong risk adjusted returns and we expect this to continue looking forward.

Key positives during the month included the Fund's largest holdings Fisher & Paykel Healthcare (+17.8%) and a2 Milk (+5.5%), which are potential beneficiaries of the coronavirus. During the month we increased our holdings in companies which are likely to benefit from shutdowns including NZ telecoms company Spark, Australian supermarket Coles and US video game makers Electronic Arts and Activision Blizzard. We believe video games will be a key beneficiary as people are forced to isolate in their homes over the next few months and will be looking for entertainment.

In the short-term markets are likely to remain volatile as investors focus on the potential impacts of the virus. Whilst the coronavirus will hit short-term economic activity and company profits over the next year or so, it should have a much lower impact on the long-term value of companies. Additionally, very large stimulus measures are likely from governments and central banks which will help to cushion these economic impacts. Given the uncertainty caused by the coronavirus the Fund remains cautious with a lower allocation to shares and higher allocation to cash than typical. However, we are excited that this market will provide great opportunities for active management, allowing us to purchase companies with strong long-term growth potential at attractive prices.

KiwiSaver Aggressive FundPortfolio Manager: Stephen Johnston

The Fund fell 10.5% in March, as global share markets closed out their worst quarter since the GFC. Concerns remain about the economic impact of COVID-19 and many economists are now expecting a recession in the coming quarters. One bright spot has been the rapid response by policymakers, with the scope of these announced policies larger than anything seen in the post-World War II era.

In a brutal month, we were pleased with the performance of some of our holdings including Amazon (+3.5%), the e-commerce powerhouse is benefiting from the ‘Working From Home’ trend, as more households shop online. To keep up with this strong demand, Amazon is hiring 100,000 people for its warehouse and delivery operations. Another strong performer was Costco (+1.4%), the membership-only warehouse chain offering a broad selection of products at the lowest prices anywhere. We are very excited about their arrival in New Zealand in 2021. Reckitt Benckiser (+7.5%), the health & hygiene company, also outperformed as demand surged for many of its brands including Dettol and Lysol cleaning products which comprise hand gels, surface cleaners and disinfectants.

The biggest detractor during March was aerospace company Transdigm (-42.6%), hurt by the collapse in global travel. Other weak performers included Indian private bank HDFC Bank (-29.9%), and French fry producer Lamb Weston (-34.3%) that we exited during the month.

In Australasia, top contributors included Fisher & Paykel Healthcare (+17.8%) on robust demand for respiratory masks and consumer staples companies such as a2 Milk (+5.5%) and supermarket chain Coles (+6.7%). Negative contributors included property company Charter Hall Group (-45.0%) and mortgage broker Australian Finance Group (-45.4%).

We continue to remain cautious and have maintained a relatively high cash allocation given the uncertainty surrounding the extent and duration of the pandemic, as well as the resulting economic impact. However, history has shown some of the very best investment opportunities tend to come during market corrections and the team remains focused on identifying high quality businesses that will emerge from this downturn even stronger.

Effective Cash#

14.46%

New Zealand Equities5.34%Australian Equities11.64%

International Equities65.01%Listed Property 3.55%

Other* 0%

‡Includes unlisted equity holdings of 1.78% *Other includes currency derivatives used to manage foreign exchange risk.1The actual investment mix incorporates the notional exposure value of equity derivatives and credit default swaps, where applicable.

# The actual cash held by the Fund is 12.45%. Effective Cash reported above is adjusted to reflect the Fund's notional positions (e.g. derivatives used to increase or reduce market exposure).

# The actual cash held by the Fund is 17.03%. Effective Cash reported above is adjusted to reflect the Fund's notional positions (e.g. derivatives used to increase or reduce market exposure).

Milford KiwiSaver Plan Monthly Review as at 31 March 2020

Fund PerformancePast month 1 year 3 years (p.a.) 5 years (p.a.) Since Fund

inception (p.a.) Unit price $ Fund size $

KiwiSaver Conservative Fund -5.02% 1.75% 4.40% 4.98% 8.19% 1.7761 217.4 M

KiwiSaver Balanced Fund -9.13% -0.17% 5.09% 6.17% 8.94% 2.2659 356.7 M

KiwiSaver Active Growth Fund^ -11.98% -2.10% 6.13% 7.27% 11.29% 3.5545 1,369.4 M

KiwiSaver Aggressive Fund -10.52% — — — — 0.9194 76.0 M

For details of how investment performance is calculated, and returns at each PIR please see www.milfordasset.com/funds-performance/view-performance#tab-performance.Performance figures are after total Fund charges* have been deducted and at 0% PIR.Please note past performance is not a guarantee of future returns.*Total Fund charges do not include the $36 p.a. Administration and Registry fee.Inception dates for the Funds: KiwiSaver Active Growth Fund: 1 October 2007, KiwiSaver Balanced Fund: 1 April 2010, KiwiSaver Conservative Fund: 1 October 2012, KiwiSaverAggressive Fund: 1 August 2019.^This is based on the performance of the AonSaver AMT Milford Aggressive Fund until 31 March 2010 and the Milford KiwiSaver Active Growth Fund from 1 April 2010.

Key Market IndicesPast month 1 year 3 years (p.a.) 5 years (p.a.) 7 years (p.a.)

S&P/NZX 50 Gross Index (with imputation credits) -12.83% 0.36% 11.95% 12.17% 13.34%

S&P/ASX 200 Accumulation Index (AUD) -20.65% -14.42% -0.56% 1.39% 4.79%

S&P/ASX 200 Accumulation Index (NZD) -21.31% -15.21% -2.41% 1.64% 2.01%

MSCI World Index (local currency)* -12.84% -9.65% 1.93% 3.45% 6.96%

MSCI World Index (NZD)* -9.22% 3.09% 7.68% 8.21% 11.13%

S&P/NZX 90-Day Bank Bill Rate 0.15% 1.55% 1.85% 2.21% 2.47%

Bloomberg Barclays Global Aggregate Bond (USD-Hedged) -1.56% 6.59% 4.65% 3.49% 3.72%

S&P/NZX NZ Government Bond Index -0.10% 5.28% 5.73% 4.93% 4.58%

*With net dividends reinvested

Milford KiwiSaver plan is the proud winner of multiple awards:

Consumer NZ People’s Choice Award – KiwiSaver Morningstar Fund Manager of the Year- KiwiSaver Category, NZ

Zenith FundSource Awards - Fund Manager of the Year

Milford KiwiSaver Plan Monthly Review as at 31 March 2020

Top Security Holdings (as a percentage of the Fund’s Net Asset Value)

KiwiSaver Conservative Fund KiwiSaver Balanced Fund

Bank Of China 2.4% 2020 1.78% a2 Milk Company 1.85%

NZLGFA 1.5% 2029 1.37% Spark New Zealand 1.65%

John Deere 1.75% 2024 1.19% Microsoft Corp 1.46%

Lendlease 4.5% 2026 1.09% Contact Energy 1.35%

Vector 3.45% 2025 1.07% Alphabet 1.27%

ASB Bank 1.83% 2024 1.05% Fisher & Paykel Healthcare 1.23%

Westpac 2.22% 2024 1.05% Amazon 1.15%

ANZ Bank 3.03% 2024 0.95% Apple 1.07%

Synlait Milk 3.83% 2024 0.90% American Water Works 1.03%

ANZ Bank Float 2024 0.86% Alibaba Group 0.96%

Note: Fixed interest securities are reported in the following format: Issuer name, interest (coupon) rate, maturity year, size of fund holding (as % of total portfolio).

KiwiSaver Active Growth Fund KiwiSaver Aggressive Fund

a2 Milk Company 4.76% Microsoft Corp 3.71%

Spark New Zealand 3.22% Amazon 3.32%

Fisher & Paykel Healthcare 3.17% Alphabet 3.11%

Contact Energy 2.98% Alibaba Group 2.88%

Commonwealth of Australia 5.5% 2023 2.40% Apple 2.44%

Microsoft Corp 2.10% Activision Blizzard 1.70%

Alphabet 2.04% Visa 1.68%

Summerset Group Holdings 1.56% S&P Global 1.59%

EBOS Group 1.37% Freee 1.57%

Home Depot 1.27% Costco Wholesale 1.53%

Note: Fixed interest securities are reported in the following format: Issuer name, interest (coupon) rate, maturity year, size of fund holding (as % of total portfolio).

Milford staff have approximately $9.6 million invested in the Milford KiwiSaver Plan as at the end of March 2020.

Milford KiwiSaver Plan Monthly Review as at 31 March 2020

Investment Highlight - Woolworths

It is probably an understatement to say we are living in bizarre times. We are all facing a very uncertain and rather unique set of economic and personal circumstances. I didn’t expect to live during periods where people fight over toilet paper, but alas, here we are.

In difficult environments many businesses see their earnings come under material pressure with liquidity and solvency becoming a key focus for equity markets. However, it is also in these times that some businesses see a tailwind to their earnings and Woolworths is one of these well positioned companies.

Woolworths have over 1,000 supermarkets across Australia and 180 in NZ (under

Roland HoughtonInvestment Analyst

the Countdown brand). They also own a range of alcohol shops, department stores and hotels however their food network accounts for around 77% of group operating profit (as at 30-June) and is hence by far the most important division. They have about 40% market share in both Australia and NZ and are the clear market leader in Australia. They have heavily invested in their distribution capabilities and have one of the most advanced distribution centres in the southern hemisphere (which we have been lucky enough to visit).

As the Coronavirus takes hold, and the government shuts down various parts of the economy, businesses like Woolworths become more attractive. Why is this?

Their earnings are defensive. People need to eat and in times of economic stress they generally eat atless expensive restaurants and dine in more frequently. Even in the 2008/2009 recession that hadno virus-related lockdowns, Woolworth’s earnings increased as people chose to save money and eat outless.

Given the fear around an eventual lockdown, consumers began stockpiling - I think it’s safe to say we haveall seen the empty shelves!

They are a beneficiary of restaurant closures as it limits consumers food options.

They have online distribution capabilities so can satisfy extreme lockdown scenarios.

In addition to the empty shelves, we’ve seen the Woolworth’s mobile app skyrocket from the 130th most downloaded app in Australia to a peak of 6th on the 15th of March. It is also sitting at #1 in the shopping category beating out the likes of eBay, Amazon and Afterpay.

Finally, the competitive environment has actually improved as Kaufland, a German ‘hyper retailer’, announced they will be exiting the Australian market.

We identified that panic was likely to set in and took advantage of what was an indiscriminate sell off in early March to build our position in Woolworths, which at one point was down 27%. Since Woolworths’ low on the 12th of March it has outperformed the ASX 200 by 19.3%.

We continue to search for winners and defensive businesses in these uncertain times and also look to take advantage of opportunities that arise from companies who have been sold too heavily.

Disclaimer: This article is intended to provide general information only. It does not take into account your investment needs or personal circumstances. It is not intended to be viewed as investment or financial advice. Should you require financial advice you should always speak to an Authorised Financial Adviser. Past performance is not a guarantee of future performance.

Milford KiwiSaver Plan Monthly Review as at 31 March 2020

Two New KiwiSaver Funds Available for You

We are delighted to launch two new KiwiSaver Funds for you to choose from. The KiwiSaver Cash Fund and the KiwiSaver Moderate Fund.

The KiwiSaver Cash Fund is a low-risk option for members wanting to manage the ups and downs of financial markets from their KiwiSaver account. For example if you were wanting to use your KiwiSaver money for a First Home Withdrawal in the next year or so; or if you are close to age 65 and intend on spending a portion of your KiwiSaver funds in the next 1-2 years.

The KiwiSaver Moderate Fund is an actively managed diversified fund investing mainly in bonds and cash with some exposure to shares. The typical mix will be 60% income assets (e.g. bonds and cash) and 40% growth assets (e.g. shares). The Moderate Fund sits between our Conservative and Balanced Funds on the risk scale and is suited to members wanting a moderate level of risk. The Fund would also suit those members already aged 65 who want to maintain some account growth as they spend their savings but wish to take less risk than the Balanced or Growth funds.

These new funds provide a full suite of fund options to use in both your saving and spending phase of KiwiSaver and retirement. The chart below summarises the Milford suite and their risk/return profile. You can choose one fund, or a mix of funds to spread your risk and you can adjust this at any time in your online Client Portal.

For more information on these funds see their fund page on our website, Milford KiwiSaver Cash Fund or Milford KiwiSaver Moderate Fund. You can also use our Risk Profile Tool to see which fund or funds is most suited to your needs.

Murray HarrisHead of KiwiSaver

Milford KiwiSaver Fund Options

Disclaimer: The Milford Monthly Review has been prepared by Milford Funds Limited. It is based on information believed to be accurate and reliable although no guarantee can begiven that this is the case. No reproduction of any material either in part or in full is permitted without prior permission. For more information about the Funds please refer to the ProductDisclosure Statement or the latest Quarterly Fund Update.