ADELANTE CAPITAL MANAGMENT SEPTEMBER 2012 ASIA-PACIFIC QUARTERLY INVESTMENT REPORT

September 2012 Quarterly Report2 ADELANTE ASIA-PACIFIC REAL ESTATE SECURITIES Fund Investment Performance The Adelante Asia-Pacific Real Estate Securities Fund produced a total return of 13.46%, outperforming the benchmark by 83 basis points forthe quarter ending 30 September 2012. Fund Performance Drivers for the Quarter Performance was positively impacted by:AnoverbenchmarkweightinSingaporelistedindustrialstockGlobalLogistic Properties (GLP). An overbenchmark weightin HongKong diversifiedstock Hysan Development (14). An over benchmark weight in Hong Kong retail based Link REIT (823). An overbenchmark weightin HongKonglisteddiversified stock Sun HungKai Properties (16). Nil exposure to retail REIT Westfield Retail Trust (WRT). Performance was negatively impacted by: Nil exposure to Hong Kong listed diversified stock Wharf Holdings (4). Nil exposure to Hong Kong listed diversified stock Henderson Land (12). Nil exposure to Hong Kong listed diversified stock New World Development (17). An overbenchmark weightin HongKonglistedretail stock HangLung Properties (101). An over benchmark weight in diversified REIT Dexus Property Group (DXS). Period Ending 30 September 2012* Quarter % 1 Year % 3 Years % p.a. 5 Years % p.a. Since Inception # % p.a. Portfolio 13.4639.0613.041.028.07 Benchmark 12.6335.218.35-3.633.63 Difference 0.833.854.694.654.44 Portfolio Valuation$869,402 *Returns are expressed before deducting tax and investment management fees. # 31 July 2006. September 2012 Quarterly Report3 Market Performance Source: FTSE Commentary Asian listed real estate securities gained 12.6% over the quarter, outperforming other regions as measured by the FTSE EPRA NAREIT Developed Index (in USD terms). Global macro-economic policy initiatives and solid profit results within the region offset concerns over a slowdown in China. The industrial and diversified property sectors enjoyed the highest total returns while on a regional basis, HongKongandSingaporeoutperformed.Eventheweakestperformingcountryintheregion(Japan +6.0%) outperformed the global average. REIT Index Performance Source: FTSE EPRA NAREIT (Local Currency) 0% 2% 4% 6% 8% 10% 12% 14% 16% 18%HotelsResidentialOfficeRetailDiversifiedIndustrialAsia Index Returns by SectorLocal CurrencyUSD0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%GlobalJapanNew ZealandAustraliaAsiaSingaporeHong KongAsia Index Returns by GeographyLocal CurrencyUSDEPRA-NAREIT Developed Index Quarter ending 30 September 2012 USD Return (%) Local Currency Return (%) Japan8.7%6.0% Australia8.2%6.7% Hong Kong17.7%17.6% Singapore17.0%13.3% New Zealand9.8%6.2% EPRA-NAREIT Developed Asia12.6%11.1% EPRA-NAREIT Developed Global5.5%5.2% September 2012 Quarterly Report4 Industrial Property strong fundamentals, strong stocks Industrialpropertycompanieswerestrongperformersduringthequarter.Theportfoliohasan overweightpositioninthissector,withholdingsinGlobalLogisticProperties(GLPSP)andGoodman Group (GMG AU). These companies benefit from robust development opportunities in Japan and China, andimprovingoperatingconditionselsewhere.Theyalsoareabletoaccessprivatecapitaltofund investment activity and to augment their corporate balance sheets. GoodmanGroupannouncedthat theCanadianPensionPlanInvestmentBoard (CPPIB)haddoubledits equity commitment to the Goodman Logistics China Holding,takingits totalcommitment to $1 billion. InadditionithasformedadevelopmentpartnershipinJapanwithAbuDhabiInvestmentCouncil (ADIC),witheachpartycommittingUS$250minequity. Thepartnershipexpectstoinitiallyinvestin excess of US$1bninlogistics developments, with aninitialinvestmentin three development projectsin the key logistics markets of Tokyo Bay and Osaka.

Goodman is also in expansion mode, flagging a likely entry into Brazil with a local partner and financed, in part, with third party capital.This comes on the heels of its recent entry to the US.We suspect GMG may require capital to further fund its expansion plans.Given Goodmans improving growth profile and itsabilitytoaccessprivatecapitaltopartlyfundexpansionsintonewmarkets,weexpectanyequity raising to be positively received. GlobalLogisticPropertiescontributedpositivelytoperformance,returningover25%forthequarter. Shortly after quarter end,GLP announced another step in the growth ofitsfundsmanagement platform, selling a 16.7% stake in a Japan venture to CBRE Global Multi Manager. Diversified driven by developers Diversifiedpropertycompanieswerealsostrongperformers,drivenbythoserealestateplatformswith developmentexposure.Quantitativeeasingwithintheregion(Japanassetpurchasingprogram)and externally (USand Europe) boosted sentiment and underpinned expectations of asset priceinflationina low interest rate environment. Hong Kong residential priceshave risenby 15%thisyear, surpassing the 1997 peaklevels. Priceshave defied government cooling measures, driven by low interest rates and low supply. Hong Kong developers rallied strongly with New World Development (17 HK) and Henderson Land (12 HK) both up over 30% for the quarter after solid earnings and good sales at recent project launches. The absence of these stocks in our portfolio detracted from relative performance as did other strongly performing developers in Hong Kong including Wharf (4 HK) and Sino Land (83 HK). September 2012 Quarterly Report5 Hong Kong residential prices Hong Kong residential supply & sales Source: Centaline Centa City Index Source: CEIC, Morgan Stanley MacroeconomicdriversalsoboosteddiversifieddevelopersinSingapore,withourzeroweightingto Capitaland(CAPLSP)detractingfromperformance.Ourpreferredexposuresinthediversifiedsector includingSunHungKaiProperties(16HK)andHysan(14HK)contributedpositivelytoperformance, bothpostingreturnsinexcessof20%forthequarter.WecommentfurtheronrecenttravelstoHong Kong and China in the appendix to this report. Japanese developers performed well in a global context, as further policy settings set a positive tone and Tokyoofficevacancyratesappeartobepeakingafteraperiodofsignificantnewsupply.Howeverin absoluteterms,positivetotalreturnsof6%to7%forourpositionsinMitsubishiEstate(8802JP)and SumitomoRealty(8830JP)weredwarfedbytheindexreturnof12.6%andthereforedetractedfrom relative performance. A-REITs road to redemption InAustralia,A-REITsroadtoredemptiongatheredmomentumintheSeptemberquarter.Withbalance sheetsrestoredandearningsrelativelyrobust,A-REITsnowlookcapableofprovidingacompetitive point of difference,particularly compared with resources stocks.The Reserve Banksinclination toward further interest rate easing also lends support to the income yield proposition. September 2012 Quarterly Report6 A-REITs vs Resources The September quarter witnessed more turn-over of senior A-REIT executives with the departure of four CEOs: Stockland Trust Group (SPG), Mirvac Group (MGR), FKP Property Group (FKP) and Aspen Property Group (APZ) adding to the tally of departures since the GFC. They have been replaced with the latest guns for hire. Disappointingly none of the roles have been filled from within existing ranks which indicates a lack of development within lower levels of management and absence of a robust long term investment culture (albeit Stockland is yet to name a replacement for Mathew Quinn). Portfolio Changes The Fund made the following changes to the portfolio during the quarter: Divested exposure in Hong Kong listed diversified stock SOHO China (410). Increased over benchmark weight in Hong Kong listed retail stock Hang Lung Properties (101). Conclusion Commercial property construction activity remainslow,interest rates are at ornear recordlowsinmost marketsandinvestorsremaincautiousonbroaderequities.Itisagoldenperiodformanygloballisted REITs which enjoy superior access to capital. These factors look, more likely than not, to be substantially factored into investor expectations:prices and earnings multiples for leading REITS are at, or close to, all time highs. However, that said we see limited signs of a material increase in new construction activity (except China) as private developer financing remains heavily curtailed. REITs balance sheets are generally sound, with manyhavingtakentheopportunitytolockinrelativelycheaplongtermcapital.Withsoundoccupancy levels, some REIT managers are able to exert rent pricing power to grow earnings while select REITs will create value through increased development activity. 0.20.30.40.50.60.729-Sep-0629-Mar-0729-Sep-0729-Mar-0829-Sep-0829-Mar-0929-Sep-0929-Mar-1029-Sep-1029-Mar-1129-Sep-1129-Mar-1229-Sep-12Aus A-reits TR relative to Aus Resource Stocks(Materials Index)TRSource: Resolution Capital September 2012 Quarterly Report7 Investment demand for real assets with stable cash flows underpins property asset values in a low interest rateenvironment.Neverthelessitisrighttobecautiouslyoptimisticinlightofthefactthatcapital markets havebeen through a cathartic event.On balance webelieve select REITs remainwell placed to generate competitive long term returns.

Team Changes Wecontinuetogrow the team,withSharnaUpchurchjoiningasanAssistantFundAccountant.Sharna worked with the team previously as the Administration Assistant for a number of years. Natalie Sullivan also joined as the Administration Assistant. September 2012 Quarterly Report8 Travel China growth before profits OverthequarterwespentasignificantamountoftimeinChinaandHongKong.Asthepaceof economicactivityinChinahasslowed,wesoughttounderstandtheramificationsofthisshiftfor landlords and tenants. WetravelledtoHongKong,Chengdu,ChongqingandShanghai,whereweattendedtheICSCGlobal Retail conference, held once every five years.China continues to have incredible secular growth trends.However,moderatinggrowthrates,abundantdevelopmentactivity,governmentpolicyinterventionand imperfect transparency all create an ever changing property minefield that warrants caution. TheChineseeconomyappearstobeundergoingamanagedevolutionfromaccelerating,highcapital investment and export-driven growth to more internal focused consumption activity.Overall growth may slow because the economy is maturing, but it is expected to remain positive.China is in a strong position, and we believe the central government will do what it has to in order to rebalance the economy.We do not envision recessionary conditions in China in the foreseeable future, albeit the economy will slow as it matures. Demandforhousingisexpectedto remainsecularlystrongduetocontinuedtrendsofurbanisationand upgradingfromobsoletestock. Ourviewoftheresidentialdevelopers,however,islittlechanged.We areconcernedaboutinvestingatpremiumvaluationlevelsincompaniesthatessentiallymanufacturea commodityproduct(housingunits)whoseprofitsaresubjecttogovernmentintervention.The governmentappearsdeterminedtolimitfuturehousepricegrowthbycoolingthemarketthrougha numberofmeasures:mortgagerestrictions,interestratesandpublichousingandothersupply-side policies.Further,StateOwnedEnterprises(SOEs)possessnon-marketadvantagesoverprivate developers.Allofthesefactorscouldseverelyretard theprofitabilityofresidentialdevelopers.Given these risks, we are not buyers of these stocks at material premiums to book value. RetailinChinaisundergoingtremendousgrowth,buttheveryrealrisk,webelieve,isthatdevelopers may build the infrastructure too far in advance of sustainable demand.In other words, there is a high risk therewillbeatimingmismatchbetweensupplyanddemand.DevelopersareenticedbyChinaslow retail space per capita and the enormous potential spending power from the emerging middle-class.The projectedincreaseinspendingispotentiallyhigherinChinathaninvirtuallyanyothermajormarket.Abundant supply has driven down initial development yields on development to very low levels such that significant growth is required before these projects become financially viable. From our travels, it is far from certain that all of the retail that is being constructed will be operationally profitable.Intermsofretailsupply,11oftheworlds14toplocationsareinChina.Thepaceofthat construction is also quickening, adding a new dimension to supply concerns. Inthecitieswetoured,particularlyTierIIcities,therewereseveralinstanceswhereverticalshopping centreshadsubstantialvacancyonthehigherfloors.Itisourunderstandingthatgovernmentpolicy encouragesdeveloperstobuildthemaximumspaceentitled.Welearnedofseveralinstanceswhere SOEs were rumoured to use theirpoliticalconnections to coerce retailers to leasespacein theircentres.Oftenretailerssignedturnover-onlyleasesasanenticementto takespaceinunprovenlocations(where the rent paid is calculated as a percentage of tenant sales with no minimum base rent).Finally, we were struckbythepredominantemphasisonhigh-endluxuryretailinChina,andwequestionhowdeepthis market will prove to be over the long term, particularly outside the top cities. USmall owner and developer Taubman Centers (TCO)announceditslong anticipatedinvestment entry intoChinaviaajointventuredevelopmentinXianwithWangfujing,thecountrysthirdlargest September 2012 Quarterly Report9 department store chain. Taubmanwillmake ameasuredinvestment of about USD125 millionfora 1/3 interest.With a projected stabilised yield-on-cost of about 6% (which we suspect will end up lower), this project does not appear to provide Taubman with adequate reward for the added risks of investing outside its core U.S. market, where development yields are closer to 8%.While the Xian market benefits from a largepopulationbase,limitedretailsupply,strongeducationalinstitutionsandvibranttechnology, aviation and tourism industries,it alsohas a relatively low income per capita for a second tier city.The ICSC conference in Shanghai also revealed that Taubman has already begun marketing its second project in China, in Zhengzhou, Henan. Chinaremainsunderservedbymodernlogisticsfacilities.OnourtoursinChengduandShanghai,we saw that the build-out of Chinas industrial property infrastructure was underway.Tenants are demanding moreefficientdistributionfacilitiesinordertobetterservetheircustomersandtoreduceChinasvery high distribution costs LogisticsdevelopmentinChinaseemscompellingwith yields-on-costestimatedtobe8.5%.Severalwell capitalisedandexperienceddevelopershaveenteredthe market,includingGlobalLogisticProperties(GLP), GoodmanGroup(GMG)andPrologis(PLD).Unlike retailland,governmentsarelesscompelledtorelease land forindustrial use because it does not have the same associatedemploymentandtaxbenefits.Therefore, excessivesupplyislessofaconcernthaninother property sectors. Hong Kong boom priced for gloom continues HongKongisenjoyingmoderateinflation,low unemploymentandhightourism,coupledwitha currencyandinterestratesthataretiedtoU.S. accommodation.Thecityisgrapplingwithcapacity issues.TourismfrommainlandChinahasgrownto28 millionin2011from7millionin2002.Hotelsarefull (88%occupancy)andthecityfeelsoverrunwith pressuretoacceptmoreChinesetouristvisitors.Recognizing the need to manage these pressures, the city governmenthasjustblockedaproposedmultipleentry visa for Szhenzen residents. SunHungKaiProperties(SHKP),alargeportfolio holding was again in the headlines in August when Hong Kong authoritiesbroughtformalbriberychargesagainst itsco-chairmen,ThomasandRaymondKwok,andtwo other former staffers.These charges had been rumoured sincethenewsbrokeearlierthisyear.Whilean investigationison-going,andtheoutcomeremains uncertain,weviewtheassetsashavingbeen undervalued in the public realm.SHKP possesses a high quality portfolio of offices, retail and residential assets in HongKongandinChina.Thiswasborneoutinthe companysfullyearresultwhichsawstrongprofit September 2012 Quarterly Report10 growthfromitsinvestmentportfoliooffsettingadeclineinresidentialdevelopmentprofitsfromahigh base in the previous year.

Another portfolio holding, Hysan (14), opened its flagship Hysan Place project in early August.This is a 710,000squarefootretailandofficetowerdirectlyconnectedtoaMTRstationinCausewayBay,a popular location for both locals and tourists.We are familiar with this project, having toured its several timesduringandsinceitsdevelopment.Theofficespaceiswellconfiguredwithefficientfloorplates, highfloorspans,state-of-the-artmechanicalsystemsandattractiveviews.Basedonthequalityofthe space, we believe it will successfully lease up despite muted office demand at present in Hong Kong. Onourinspection,theretailcomponent(all17floorsofit!)wasremarkablybusy,evenonthehigher levels.Given site area constraints, thelayout of the retailfloorsisnot ideal,and wefoundit somewhat confusingtonavigate.Nevertheless,thesitehasremarkablyhighfoottraffic.Certainlyifthestrong tenantmix(anApplestorewillbeopeningsoon)andshoppingtrafficareanyindication,HysanPlace will be an important value driver for the company over the coming years. September 2012 Quarterly Report11 Contact Details Marco Colantonio Portfolio Manager Direct Line: 02 8258 9155 Email: marco.colantonio@resolutioncapital.com.au Resolution Capital Limited Level 38 Australia Square Tower Sydney NSW 2000 GPO Box 553 Sydney NSW 2001 Tel: 02 8258 9188 Fax: 02 8258 9199 UndertheauthorisationscontainedinitsAustralianFinancialServicesLicence,theCompanyisonlyabletoprovidegeneraladvicetoitswholesaleclients.Accordinglythe informationattachedisforgeneralinformationonly.Itdoesnothaveregardtoaspecificinvestmentobjective,financialsituationortheparticularneedsofanyperson.You shouldseekadviceregardingtheappropriatenessofaninvestmentstrategydiscussedorrecommendedintheattachedinformationandshouldunderstandthatstatements regardingfutureprospects maynotberealised.Youshouldalsonotethatthereturnsfrom investmentsmayfluctuateandthatpastperformanceisnotnecessarilyaguideto future performance.