Welcome_________

www.findex.com.au

Turbulent markets - the “new” normal

Local and global investment markets continue to be characterised by three

dominant features, sometimes referred to as the ‘new normal’.

2

• Interest rates around the world are at all time lows and there is nothing to suggest they will rise

• Demographics suggest lower population growth and an aging population. A key driver of

economic growth is now muted

• Significant policy issues lurk across the globe

•EU – subsequent to BREXIT – Italy, France and Netherlands referendums on leadership

•US Elections -Trump policies

•China policy reactions – transition to consumer economy

04/08 - Bank of England cuts Bank Rate to 0.25% and introduces a

package of measures designed to provide additional monetary stimulus.

04/08 – RBA cuts 0.25% to 1.5%

Our investment philosophy

Grow

Quality,

carefully, value

Protect against permanent lossFraud, panic buying in booms and selling in busts,

complexity opaqueness, fees, taxes, following the

herd, excess leverage

Preserve real value Asset Allocation Portfolio

Construction and Management

3

PS Organisation Chart

Chief Investment Officer

K CanavanCRH Risk

M Doukas

Head of Services

E Taylor

Head of Funds

Management

C Suchde

Head of Product

Development

M Waugh

Head of Research

S Cavaglia

Securities

Implementation

Co-ordinator

S Naz

Research

Coordinator

S Patterson

Research

Services

Manager

B Moran

Research

Services Officer

G Neacsu

Securities/Funds

Implementation

Co-ordinator

M Durso

Securities

Implementation

Administrator

B Yang

Fund Accountant

Finance Team

(Rotation)

Product Services

Officer

K Whiting

Product Services

Officer

J Tallant

Product Services

Officer

S Roszbach

Product Services

Administrator

K Wilkins

Resp Executive Oversight

Portfolio

Administration

Manager

D Owen

4

Senior Research

Analyst

Eddie Lee

Administration

S O’Connor

Administration

I Philip-Wilson

Senior

International

USA Research

Professional

A Sallander

Committee structure and overview

FIAAC is responsible for all

investment related decisions

within the group. This includes:

Single house view on

markets

Quarterly Tactical Asset

Allocation

All investment related policy

and business rules relating to

asset allocation, portfolio

construction and approved

products (APL)

The blending of investments

into portfolios, in accordance

with the portfolio construction

and management policies of

the Findex Group

External members have a veto

right over any internal product

decisions made by the

committee

Advisor representatives will sit

on the committee on a rotating

basis

External Members Vote

Allocation 37.5%

Advisor Members Vote

Allocation 37.5%

Management Members

Vote Allocation 25%

Findex Investment and Asset Allocation Committee

FIAAC (Quarterly AA, House View and APL as required)

Chairman – Tony Roussos (Non Voting)

Independent Voting Members Primary Voting Members Management Members

Non-Voting Members

Secondary Members

Emmanuel

Calligeris

Chris

Condon

John

Ives

Damian

McVilly

Greg

Barter

Kieran

Canavan

Matthew

Swieconek

Stefano

Cavaglia

Matt

Waugh

Danielle

Ludbey

Paul

Crowne

Rodney

Wark

Scott

Redpath

5

Investment Decision Flow

SSgA – Asset

Allocation

External Asset

ConsultantsInternal Research

Dr Cavaglia

Investment committee oversight

FIAAC

Exte

rna

l

Ad

vis

ors

Go

ve

rna

nce

Inve

stm

en

t D

ecis

ion

s

an

d S

olu

tio

ns

Imp

lem

en

tatio

n

an

d E

xe

cu

tio

n

Ad

vis

er

an

d

Clie

nt

AA DecisionsInvestment

Decisions

AA ModelsA, A+, B, C, D and

G

Investments (Shares, bonds

etc.)

AA Sectors (Passive, listed

etc.)

Wrap Platform

Custody, implementation & reporting

AdvisorConduit to client – match client with the investment and/or model solution that will give the client the best

chance of achieving their investment goal/s

Services

E Taylor

6

Investment services enhancements 2015

Investment

management

Governance and compliance

Investment Decisions

Improved advisory partners • Appointed State Street as AA Advisor

• Appointed Altair as direct equities advisor

• Appointed Dalton Nicol Reid as mandate

manager on MDA

.

New committee structures• Best practice structures

• Additional external members –

leaders in industry – Chris

Condon and Emmanuel Calligeris

– both successful ex CIOs

• Broad adviser representation from

all brands

Internal Research Division• New Head of Investment

Research – Dr Stefano Cavaglia

• Additional research resources –

GN (actuary and maths) + support

and communications for advisers

7

Three new hires for 2016

How we aim to achieve our clients goals

Asset A

llocation

Austr

alia

n E

quitie

s

Inte

rnational

Equitie

s

Fix

ed I

ncom

e

Port

folio

Constr

uction

Altern

ative A

ssets

Your goals

Disciplined, strategic thinking is required to harness risk in order to meet investors’ goals.

Building wealth in the new investment landscape

Asset Allocation

Lower growth = lower expected equity returns

Lower interest rates = lower expected bond returns

Macro uncertainty = increased turbulence

Key insights:

• Revise expectations

• Seek new return drivers: alternative investments

• Build portfolios that account for increased turbulence

9

The basis for Asset Allocation is that different asset classes offer returns / risks

that are not perfectly correlated and diversifying portfolios across asset classes

will help to optimise risk-adjusted returns.

State Street – Advisors to Findex Group

10

What do we gain?

• Institutional quality investment management

• Greater depth across the asset classes supported by large global

investment team (research and portfolio implementation) with a significant

local presence

• Ability to structure investment strategies – leading to greater breadth and

cost efficiency

• Access to proprietary data; key competitive advantage

• Leading edge implementation of goals based investment strategies

• Strategic Partnership (one of 20 around the globe)

• Long Standing relationship: 20 years +

Portfolio Management In Practice

Boston, London, Paris, Dublin, Tokyo, Hong Kong, Sydney (~70 people) Locations

Functional

units

Portfolio

Management

Strategy and

Research

Investment Mgr

Oversight Team

Task teams are selected from all functional units

Task

teams

Selection &

Rotation

Asset

Class (9 sub teams)

Economic Alpha

Research

Strategy

Research MRI

Policy &

Politics (6

sub teams)

Voting (7 sub

teams)

All functional units

2 years

All units

(PM)

All units

(geography)

All units (self select)

Strategy and Research

Static (specialists)

Task teams provide quantitative and qualitative input

Monthly Alpha (TAA) Meeting

Annual SAA Review

Local portfolio management team implement global views with local mandate applicability

This information contained above is for illustrative purposes only.

A multi-faceted approach to delivering

robust investment outcomes

What is it Frequency Return profile Risk profile

Strategic Asset

Allocation (SAA)

Assets held fit for

their purpose

Annual review to

determine relevance

Driver of long- term

performance in

‘normal’ markets

Driver of long-term

risk with limited

capacity to manage

risk outside ‘normal’

markets

Tactical Asset

Allocation (TAA) Tactical tilts Quarterly / Monthly

Driver of relative

performance on a

quarterly / monthly

basis

Risk management

relative with limited

ability to protect on

the downside

Strategic Asset Allocation

Goal: Seeks to meet or exceed custom benchmark’s risk and return

characteristics over the long term

Philosophy • We believe Strategic Asset Allocation is the most

important investment decision; it can be the greatest

contributor to a fund’s long-term performance

Process

• Manage diversified multi-asset class portfolios, usually

fund of funds structure using active or passive underlying

funds

• Portfolio reset to benchmark weights monthly, preferred

calendar, or range-based rebalancing methodology

• Intra-month cash flow monitoring to minimize tracking

error

Results

• Efficient implementation with a choice of internally or

externally managed active and passive commingled

funds, ETFS or Derivatives based overlay strategies

• Daily oversight and automatic rebalancing to minimize

monitoring needs

Strategic Positioning • Low cost, flexible commingled fund (conservative,

moderate and aggressive risk profiles) or custom

separate account solutions

Client Focused Approach in Developing

Strategic Asset Allocations

• Validate that strategic allocation expectations meet identified client needs and incorporate client specific constraints

• Portfolio management review of asset allocation mix for reasonability

• Continuous review of strategic allocation and benefits of potential implementation of new asset classes

• Quarterly ISG asset lass risk/return expectations • Foundation for developing forward looking,

diversified strategic asset allocations • Analysis of long windows of historic data

overlayed with forward looking analytics • Expected return forecasts include:

• Top down macro variables • Bottom up valuation

• Collaborate with clients seeks to understand unique circumstances

• Level of risk aversion • Return expectations • Liquidity needs • Unique circumstances

• Define appropriate asset class universe

• Inputs begin with previously identified asset class universe and ISG forecasts

• Run unconstrained optimization • Incorporate client specific constraints into

optimization process (e.g., limit exposure to specified asset class)

• Optimized output generates efficient, asset allocation portfolios – Maximize return for level of risk

ISG Client Collaboration

Annual review of existing SAA

Asset ClassForecasts

FundamentalReview

PortfolioOptimisation

TAA Difference

EXPERIENCE

• Global tactical asset allocation management dating back to 1989

• Over 50 portfolio managers at 8 global sites with an average of 15 years of investment experience

• Leverage 40+ person PhD level Advanced Research Center (ARC) for testing intricate quantitative models

PROCESS

• Unique and differentiated blend of quantitative rigor and fundamental perspectives

• Quantitative power derives from Market Regime Indicator (MRI) and specific asset class models providing predicted returns on ~100 asset classes

• Fundamental perspectives, opinions and experience to consider implications of events that cannot be modeled

RESULTS

• Outperformed benchmark in 9 of the past 10 years

• TAA alpha generation across a breadth of investment decisions (eg, stock/bond, country/region, mkt cap)

• Strict risk management with transparent tracking error ranges and customizable guidelines / bands

Key Differentiators

Market Regime Assessment

SSgA’s Market Regime Indicator (“MRI”) is based on forward-looking signals

Equity Index

Implied Volatility

Currency pairs

one month

Implied Volatility

Spreads on

risky debt

Market

Regime

Forecast

We identify five distinct

regimes

within the market cycle

Portfolio

Risk

Target

CRISIS

Extreme risk aversion

(‘fear’)

HIGH RISK AVERSION

Aversion towards risk-

taking

NORMAL

Neutral market sentiment

LOW RISK AVERSION

Appetite towards risk-

taking

EUPHORIA

Extreme risk appetite

(‘greed’/complacency)

Market Regime Assessment

Decision Making Process for Positioning Inputs

TasksT 0 T+1 T+2 T+3 T+4 T+5 T+6 T+7 T+8 End

Politics and Policy Discussion

MRI Discussion – set active risk budget

Models processed and run

Asset summaries completed and optimization run

Outputs reviewed by voting members

Recommended trades reviewed / PM leaders set

consensus trades

“Devils Advocate” prepares their case

Alpha meeting takes place – trades finalised

Execution may begin

Start

Completion - implementation

Process begins – completed monthly

Risk mitigation – devils advocate

Discrete steps

Tactical asset allocation shifts

19

13.021.5 28.5

39.556.5

74.5

9.0

15.018.0

17.0

15.0

11.0

78.063.5

53.543.5

28.514.5

0

20

40

60

80

100

DEFENSIVE MODERATE BALANCED GROWTH HIGH GROWTH GROWTH PLUS

Equities Alternatives Bonds

CURRENT ASSET ALLOCATION – RISK CLASS

Current asset allocation - Strategic

20

8.0

14.018.0

25.0

35.0

47.0

5.0

7.5

10.5

14.5

21.5

27.5

5.0

8.0

10.0

10.0

9.0

6.0

3.0

3.0

3.0

3.0

3.0

4.0

1.0

1.0

1.0

1.0

1.0

1.0

50.0

43.5

34.5

25.5

12.5

5.5

9.0

9.0 8.0 7.0 5.0

2.0

5.0

5.0 5.0 5.0 5.01.014.0

6.0 6.0 6.0 6.0 6.0

0

10

20

30

40

50

60

70

80

90

100

DEFENSIVE MODERATE BALANCED GROWTH HIGH GROWTH GROWTH PLUS

Cash

International Credit

Domestic Credit

International Government Bonds

Domestic Government Bonds

Hedge Funds

International Infrastructure

Domestic Infrastructure

International Real Estate

Domestic Real Estate

Emerging Equities

International Developed Equities

Domestic Equities

Compounding

21

Alternative Investments

22

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5%

Cash

Gbl Corp Credit*

Dom Credit

Gbl Gov't Bonds*

Dom Gov't Bonds

Hedge Funds*

International Infra

Domestic Infra

Int'l Real Estate

Dom Real Estate

Int'l Dev'd Equities

Dom Equities

Average monthly return when ASX All Ords ↑

-3.5% -3.0% -2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0%

Cash

Gbl Corp Credit*

Dom Credit

Gbl Gov't Bonds*

Dom Gov't Bonds

Hedge Funds*

International Infra

Domestic Infra

Int'l Real Estate

Dom Real Estate

Int'l Dev'd Equities

Dom Equities

Average monthly return when ASX All Ords ↓

* Asset classes marked with * are hedged into AUD. All return data from Feb 1990 through Nov 2015.

Alternative

investments

When the

market rises

Alternative

investments

When the

market falls

Alternative Investments

23

2008 2012

Drawdowns comparison – various periods

24

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

All Ords Accum Index MSCI WORLD Standard GR AUD

-45%

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

All Ords Accum Index MSCI WORLD Standard GR AUD

-50%

-45%

-40%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

All Ords Accum Index MSCI WORLD Standard GR AUD

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

All Ords Accum Index MSCI WORLD Standard GR AUD

Alternative Investments

25

Performance 30 June 2016

26

Moderate Portfolio - Portfolios Excess Return

-5.00% -2.50% 0.00% 2.50% 5.00%

FIWA Market Hybrid Moderate

FIWA Market Active Moderate

FIWA Equity Income Moderate

Findex Moderate - Listed (DNR HC)

Findex Moderate Unlisted

3 Months 1 Year 3 Years (p.a.)

Performance 30 June 2016

27

Growth Portfolio - Portfolios Excess Return

-5.00% -2.50% 0.00% 2.50% 5.00%

FIWA Market Hybrid Balanced

FIWA Market Active Balanced

FIWA Ethical Balanced SRI

Findex Growth - Listed (DNR HC)

Findex Growth Unlisted

FIWA Equity Income Balanced

FIWA Direct Equity Core - Balanced

FIWA Direct Equity Inc - Balanced

3 Months 1 Year 3 Years (p.a.)

Performance 30 June 2016

28

Returns over the last year % Returns since inception %

Inception

Date

05/2011

02/2013

05/2011

05/2011

05/2011

05/2011

3.24

3.55

3.64

2.96

1.82

0.49

3.59

3.94

4.12

3.83

3.10

2.05

2.98

1.90

1.90

1.29

1.02

1.02

0 5

A

A+

B

C

D

G

Listed Unlisted Morningstar

6.78

7.66

7.99

8.56

9.14

8.85

7.23

8.21

8.71

9.57

10.43

10.28

5.47

6.71

6.28

6.82

7.80

7.80

0 5 10 15

A

A+

B

C

D

G

Listed Unlisted Morningstar

Performance 30 June 2016 cont.

29

Returns over the last 3 months %

1.76

2.45

2.85

3.04

3.24

3.33

1.77

2.47

2.88

3.09

3.32

3.46

2.15

2.42

2.42

2.61

3.28

3.28

0 5

A

A+

B

C

D

G

Listed Unlisted Morningstar

Returns over the last year % Returns since inception %

Inception

Date

05/2011

02/2013

05/2011

05/2011

05/2011

05/2011

3.24

3.55

3.64

2.96

1.82

0.49

3.59

3.94

4.12

3.83

3.10

2.05

2.98

1.90

1.90

1.29

1.02

1.02

0 5

A

A+

B

C

D

G

Listed Unlisted Morningstar

6.78

7.66

7.99

8.56

9.14

8.85

7.23

8.21

8.71

9.57

10.43

10.28

5.47

6.71

6.28

6.82

7.80

7.80

0 5 10 15

A

A+

B

C

D

G

Listed Unlisted Morningstar