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MLC investment performance review Updated to 31 December 2009

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MLC investment performance review. Updated to 31 December 2009. General advice warning and disclaimer. - PowerPoint PPT Presentation

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Page 1: MLC investment performance review

MLC investment performance review

Updated to 31 December 2009

Page 2: MLC investment performance review

General advice warning and disclaimerAny advice in this communication has been prepared without taking account of individual

objectives, financial situation or needs. Because of this you should, before acting on any information in this communication, consider whether it is appropriate to your objectives, financial situation and needs. You should obtain a Product Disclosure Statement or other disclosure document relating to any financial product issued by MLC Investments Limited (ABN 30 002 641 661) and MLC Nominees Pty Ltd (ABN 93 002 814 959) as trustee of The Universal Super Scheme (ABN 44 928 361 101), and consider it before making any decision about whether to acquire or continue to hold the product. A copy of the Product Disclosure Statement or other disclosure document is available upon request by phoning the MLC call centre on 132 652 or on our website at mlc.com.au.

An investment in any product offered by a member company of the National group does not represent a deposit with or a liability of the National Australia Bank Limited ABN 12 004 044 937 or other member company of the National Australia Bank group of companies and is subject to investment risk including possible delays in repayment and loss or income and capital invested. None of the National Australia Bank Limited, MLC Limited, MLC Investments Limited or other member company in the National Australia Bank group of companies guarantees the capital value, payment of income or performance of any financial product referred to in this publication.

Past performance is not indicative of future performance. The value of an investment may rise or fall with the changes in the market. Please note that all return figures reported are before management fees and taxes, and for the period up to 31 December 2009, unless otherwise stated.

The specialist investment management companies are current as at 31 December 2009. Funds under management figures are as at 31 December 2009, unless otherwise stated. Investment managers are regularly reviewed and may be appointed or removed at any time without prior notice to you.

Page 3: MLC investment performance review

AGENDA

1. Overall results

2. The market environment

3. Drill down by asset class

Slide 3

Page 4: MLC investment performance review

1. Overall results

Page 5: MLC investment performance review

MLC Horizon 4 – Super

Highlights:• Portfolio benefited from higher allocation to growth assets in a rising market

environment.• A rising $A helped further as the portfolio has a higher allocation to hedged

assets from overseas.• Private Assets was the only dampener on absolute returns, on account of

delayed valuations associated with the sector.• Marked turnaround in Global Shares (excess +3.9, unhedged) and positive

absolute returns for the debt strategy (+10.7%) coupled with continued strength in Global Property (excess +6.3%) helped the most in overall performance.

MLC Horizon 4 - Balanced Portfolio

Performance to 3 Months 1 Year 3 Years 5 Years31-Dec-09 % % % p.a. % p.a. MLC MasterKey Super / Gold Star / Business Super(before taking into account fees and tax) MLC MasterKey Super Fundamentals(takes into account fees and tax) MLC MasterKey Super Gold Star / Business Super*(takes into account fees and tax)*MLC MasterKey Business Super commenced on 30 April 2001 and issues the same unit price as that reported for MLC MasterKey Superannuation Gold Star. The returns outlined above do not include allowance for fee rebates you may be entitled to should you be part of a large employer plan.

2.5 16.2 -2.3 3.4

2.7 17.0 - -

3.4 19.7 -0.7 5.7

Slide 5

Page 6: MLC investment performance review

MLC Horizon 4 – total returnsHistorical Absolute Performance

MLC MasterKey Super Gold Star Horizon 4 Balanced Portfolio(after taking into account fees and tax)

-30%

-20%

-10%

0%

10%

20%

30%

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Ret

urn

% p

.a.

5 Years Ended 31 December 1 Year Ended 31 December

Slide 6

Page 7: MLC investment performance review

MLC Horizon 4 – asset class contribution

Contribution to Total Return by Asset ClassMLC Horizon 4 Balanced Portfolio

(before taking into account fees and tax)

-5

0

5

10

15

20

25

AustralianShares

Global Shares- Hedged

Global Shares- Unhedged

Global REITs Global PrivateAssets

LTAR DebtSecurities

Horizon 4Total Return

Ret

urn

Co

ntr

ibu

tio

n %

(an

nu

alis

ed f

or

per

iod

s g

reat

er t

han

1 y

ear)

5 years to Dec-2009 3 years to Dec-2009 1 year to Dec-2009 3 months to Dec-2009

Slide 7

Page 8: MLC investment performance review

MLC Horizon 5 – Super

Highlights:• Portfolio benefited from higher allocation to growth assets in a rising market

environment• A rising $A helped further as the portfolio has a higher allocation to hedged

assets from overseas.• Private Assets was the only dampener on absolute returns, on account of

delayed valuations associated with the sector.• Marked turnaround in Global Shares (excess +3.9, unhedged) and positive

absolute returns for the debt strategy (+12.4%) coupled with continued strength in Global Property (excess +6.3%) helped the most in overall performance.

MLC Horizon 5 - Growth Portfolio

Performance to 3 Months 1 Year 3 Years 5 Years31-Dec-09 % % % p.a. % p.a. MLC MasterKey Super / Gold Star / Business Super(before taking into account fees and tax) MLC MasterKey Super Fundamentals(takes into account fees and tax) MLC MasterKey Super Gold Star / Business Super*(takes into account fees and tax)

*MLC MasterKey Business Super commenced on 30 April 2001 and issues the same unit price as that reported for MLC MasterKey Superannuation Gold Star.The returns outlined above do not include allowance for fee rebates you may be entitled to should you be part of a large employer plan.

2.8 18.4 -3.7 3.2

3.0 19.2 - -

3.7 22.0 -2.5 5.3

Slide 8

Page 9: MLC investment performance review

MLC Horizon 5 – total returnsHistorical Absolute Performance

MLC MasterKey Super Gold Star Horizon 5 Growth Portfolio(after taking into account fees and tax)

-30%

-20%

-10%

0%

10%

20%

30%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Ret

urn

% p

.a.

5 Years Ended 31 December 1 Year Ended 31 December

Slide 9

Page 10: MLC investment performance review

MLC Horizon 5 – asset class contribution

Contribution to Total Return by Asset ClassMLC Horizon 5 Growth Portfolio

(before taking into account fees and tax)

-5

0

5

10

15

20

25

AustralianShares

GlobalShares -Hedged

GlobalShares -

Unhedged

Global REITs Global PrivateAssets

LTAR DebtSecurities

Horizon 5Total Return

Re

turn

Co

ntr

ibu

tio

n %

(an

nu

alis

ed f

or

pe

rio

ds

gre

ate

r th

an 1

yea

r)

5 years to Dec-2009 3 years to Dec-2009 1 year to Dec-2009 3 months to Dec-2009

Slide 10

Page 11: MLC investment performance review

2. The market environment

Page 12: MLC investment performance review

Market environment - asset class returnsfor the period ending 31 December 2009

*

Asset Class Performance

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

AustralianShares

GlobalShares

(hedged)

GlobalShares

EmergingMarkets

AustralianProperty

Securities

GlobalProperty

Securities

AustralianBonds

GlobalBonds

(hedged)

Global HighYield Bonds

(hedged)

Inflation-linkedBonds

Cash

Ind

ex

Re

turn

Quarter to Dec-09 % 1 Year to Dec-09 % 3 Year to Dec-09 % p.a. 5 Year to Dec-09 % p.a.

Index data source: S&P/ASX 300, MSCI All Countries (hedged), MSCI All Countries, MSCI Emerging Markets, S&P/ASX 200 LPT, UBS Global REIT (hedged), UBS Composite Bond (all mats), BCGA Global Agg (hedged), BCGA US Corp HY BB/B (hedged), UBS Inflation Linked Bonds (all mats), UBS Australian Bank Bill respectively.

Slide 12

Page 13: MLC investment performance review

Market environment•Worst of the crisis over, but serious imbalances and issues remain

unresolved•The major economies are in the early stages of economic recovery,

but…•…the recovery is going to be subdued – consumers (especially in the

English speaking world) will take time to repair balance sheets, re-build savings

•The Australian economy has fared relatively well through the crisis, and growth is likely to pick-up over the coming year

•Prospects for the emerging economies are brighter than they’ve been for many years

• Interest rates likely to stay lower for longer – world’s central banks won’t mind a bit more inflation?

• Investment returns in this recovery are likely to be more modest than we’ve been used to

•How long before memories fade? Longer this time than usual!

Slide 13

Page 14: MLC investment performance review

3. Drill down by asset class

Australian shares

Page 15: MLC investment performance review

Australian shares - performance

Highlights:• Outperformed for much of the last 2 GFC years, but a late-in-year rally by BHP

Billiton (2nd largest strategy underweight) pushed return below market (still a great absolute return)

• 6/10 managers outperformed, stock specific not style driven.• Positives: o/w Wesfarmers, ANZ, J.Hardie Negatives: u/w BHP, CBA, o/w NAB,

Suncorp-Met. • Some managers believe in the economic/earnings recovery story (so o/w

cyclicals) but some don’t (reducing cyclicals, returning to defensive stocks where earnings outlook more certain). Portfolio themes are mixed - o/w Building Materials, Media, Telecom

- u/w Banks, Resources, REITs

MLC Australian Share Fund

Performance to 3 Months 1 Year 3 Years 5 Years31-Dec-09 % % % p.a. % p.a.MLC Masterkey Super Fundamentals / Gold Star / Business Super(before taking into account fees and tax)MLC Masterkey Super Fundamentals(takes into account fees and tax)MLC Masterkey Super Gold Star / Business Super*(takes into account fees and tax)S&P/ASX 300 Accumulation Index(S&P/ASX 200 Index prior to Nov 2002)

3.4 8.3

33.0 -

2.0 32.0 -0.3 7.2

8.8

2.1

*MLC MasterKey Business Super commenced on 30 April 2001 and issues the same unit price as that reported for MLC MasterKey Superannuation Gold Star. The returns outlined above do not include allowance for fee rebates you may be entitled to should you be part of a large employer plan.

36.7

-

2.4 0.4

-0.837.6

Slide 15

Page 16: MLC investment performance review

Australian shares – total returnsHistorical Absolute Performance

MLC MasterKey Super Gold Star Australian Share Fund(after taking into account fees and tax)

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

Ret

urn

% p

.a.

5 Years Ended 31 December 1 Year Ended 31 December

Slide 16

Page 17: MLC investment performance review

Australian shares – excess returns

Rolling Performance in Excess of the IndexMLC Australian Share Fund

(before taking into account fees and tax)

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Dec

-90

Jun

-91

Dec

-91

Jun

-92

Dec

-92

Jun

-93

Dec

-93

Jun

-94

Dec

-94

Jun

-95

Dec

-95

Jun

-96

Dec

-96

Jun

-97

Dec

-97

Jun

-98

Dec

-98

Jun

-99

Dec

-99

Jun

-00

Dec

-00

Jun

-01

Dec

-01

Jun

-02

Dec

-02

Jun

-03

Dec

-03

Jun

-04

Dec

-04

Jun

-05

Dec

-05

Jun

-06

Dec

-06

Jun

-07

Dec

-07

Jun

-08

Dec

-08

Jun

-09

Dec

-09

An

nu

alis

ed

Ex

ce

ss

Re

turn

(S

&P

/AS

X 3

00

Ac

cu

mu

lati

on

Ind

ex)

1 Year 3 Years 5 Years

Slide 17

Page 18: MLC investment performance review

Australian Shares – manager contribution

Contributors:• Concord Capital +10.3% : o/w ANZ, Westpac, James Hardie, Billabong, JB Hi-Fi • JF Capital Partners +10%: o/w Rio Tinto, Felix Resources (takeover), Independence Group u/w QBE • Balanced Equity +6.5%: o/w ANZ, Westpac, Lend Lease, Orica, u/w Westfield • Northward +1.8%: o/w Asciano, Rio Tinto, CBA, • Dimensional +1.4%: o/w Macquarie, incitec Pivot, Alumona, Downer EDI• Maple-Brown Abbott +0.4%: o/w Wesfarmers, ANz, Rio Tinto, Wesfarmers

Detractors:• Northcape -1.5%: zero CBA and Wesfarmers, o/w NAB, Sonic Healthcare, Singtel, Brambles• Wallara -2.5%: o/w Stockland, NAB, Origin Energy, u/w CBA• Contango -4.6%: o/w NAB, Woolworths• Lazard -12.7%: zero BHP Billiton

Manager Performance in Excess of the IndexMLC Australian Share Fund

(before taking into account fees and tax)

-15%

-10%

-5%

0%

5%

10%

15%

Maple-BrownAbbott

Lazard Dimensional Contango Concord JF Capital Wallara BalancedEquity

Northcape NorthwardCapital

AustralianShare Fund

Exc

ess

Re

turn

vs

S&

P/A

SX

300

Acc

um

ula

tio

n In

de

x(a

nn

ualised

fo

r p

eri

od

s g

reate

r th

an

1 y

ear)

Quarter to Dec-09 1 Year to Dec-09 3 years to Dec-09 5 Years to Dec-09

Slide 18

Page 19: MLC investment performance review

3. Drill down by asset class

Global shares

Page 20: MLC investment performance review

Global shares - performance

Highlights:• MLC Global Shares Strategy out performed index over the quarter and 1 year, while still underperforming over the longer 3 and 5 year terms.• Unhedged investors were dampened by the $A, which rose 24% against the Trade Weighted Index. Hedged investors benefited with 1-year returns of 35.1% (before fees and taxes).• Performance driven by global rally in all market segments. Developed mkt up +1.4, EM +39%.• Benefited from defensive positioning at the beginning of the year by Wellington and Walter Scott.• Higher volatility returns were driven by new manager Sands Capital and Dimensional.

MLC Global Share Fund

Performance to 3 Months 1 Year 3 Years 5 Years31-Dec-09 % % % p.a. % p.a.MLC MasterKey Super Fundamentals / Gold Star / Business Super(before taking into account fees and tax)MLC MasterKey Super Fundamentals(takes into account fees and tax)

MLC MasterKey Super Gold Star / Business Super*

(takes into account fees and tax)MSCI All Country World Index(MSCI World Index prior to July 2002)

7.0 -9.8 -1.5

*MLC MasterKey Business Super commenced on 30 April 2001 and issues the same unit price as that reported for MLC MasterKey Superannuation Gold Star.The returns outlined above do not include allowance for fee rebates you may be entitled to should you be part of a large employer plan.

5.02.8 0.8

8.9

-

3.5 -9.2

-8.2

2.2

0.3

7.7 -

2.0

Slide 20

Page 21: MLC investment performance review

Global shares – total returnsHistorical Absolute Performance

MLC MasterKey Super Gold Star Global Share Fund(after taking into account fees and tax)

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

Ret

urn

% p

.a.

5 Years Ended 31 December 1 Year Ended 31 December

Slide 21

Page 22: MLC investment performance review

Global shares – excess performanceRolling Performance in Excess of the Index

MLC Global Share Fund(before taking into account fees and tax)

-15%

-10%

-5%

0%

5%

10%

15%

20%

Dec

-90

Jun

-91

Dec

-91

Jun

-92

Dec

-92

Jun

-93

Dec

-93

Jun

-94

Dec

-94

Jun

-95

Dec

-95

Jun

-96

Dec

-96

Jun

-97

Dec

-97

Jun

-98

Dec

-98

Jun

-99

Dec

-99

Jun

-00

Dec

-00

Jun

-01

Dec

-01

Jun

-02

Dec

-02

Jun

-03

Dec

-03

Jun

-04

Dec

-04

Jun

-05

Dec

-05

Jun

-06

Dec

-06

Jun

-07

Dec

-07

Jun

-08

Dec

-08

Jun

-09

Dec

-09

An

nu

alis

ed

Ex

ce

ss

Re

turn

(M

SC

I All

Co

un

try

Wo

rld

Ind

ex

)

1 Year 3 Years 5 Years

Slide 22

Page 23: MLC investment performance review

Global shares – manager contribution

Contributors:• Dimensional (+7%) – Riskier parts of the market was very much in favour throughout 2009.• Wellington (+2%) – Defensive/high quality positions adopted early 2009. • Walter Scott (+1%) – Low debt, high EPS growth focus benefited early, gave up some gains with risk appetites

increasing.• Of the new managers, over the quarter all outperformed the index. Sands (+4.6%, EM holdings and growth

dominated stocks). Tweedy (+2.7 on higher quality value focus). Mondrian (+0.8) and Hardin Loevner (+0.1) muted as dividend focus shares grew gradually.

Detractors:• Capital (-2.7%) – Too early to comment as data is not available, but may be driven by stock selection in

materials.• Over the quarter, Dimensional (-3.2%) faced negative sentiments around riskier small-cap stocks and Wellington

(-0.2%) gave up some gains from the previous two quarters (too early to comment due to lack of data).

Manager Performance in Excess of the IndexMLC Global Share Fund

(before taking into account fees and tax)

-4%

-2%

0%

2%

4%

6%

8%

CapitalInternational

WellingtonManagement

Walter Scott HardingLoevner

Sands Capital Mondrian Tweedy,Browne

Dimensional Global ShareFund

Ex

ce

ss

Re

turn

vs

MS

CI

All

Co

un

try

Wo

rld

In

de

x(a

nn

ualised

fo

r p

eri

od

s g

reate

r th

an

1 y

ear)

Quarter to Dec-09 1 Year to Dec-09 3 years to Dec-09 5 Years to Dec-09

Slide 23

Page 24: MLC investment performance review

3. Drill down by asset class

Australian property

Page 25: MLC investment performance review

Australian property - performance

Highlights:• Massive capital raisings have helped stabilise the sector but distributions have been slashed/significantly diluted • 1 year absolute return back into positive territory (but still much lost ground to make up)• MLC Australian Property has produced stellar outperformance vs index over all measurement periods (albeit absolute returns for 3-5 years are negative). Both managers outperformed by substantial margins in all periods. • This result is due to stock selection of the underlying managers, particularly Resolution Capital, whose longstanding preference for quality REITs (i.e. management competence, strategic direction, transparency, prudently geared) helped the Fund avoid the worst of the Aussie REIT train wreck in the last 2-3 years.• MLC’s mandate initiative given to Resolution a number of years ago which allows them to invest in global REITs also assisted greatly as the Australian sector imploded.

MLC Property Securities Fund

Performance to 3 Months 1 Year 3 Years 5 Years31-Dec-09 % % % p.a. % p.a.MLC MasterKey Super Fundamentals / Gold Star / Business Super(before taking into account fees and tax)MLC MasterKey Super Fundamentals(takes into account fees and tax)MLC MasterKey Super Gold Star / Business Super*(takes into account fees and tax)S&P/ASX 300 Property Accumulation Index(S&P/ASX 200 Property Index prior to Nov 2006)

-4.1 8.7 -19.6 -5.8

14.8

9.4

-3.7 -18.8

-4.0

-4.0

- -

*MLC MasterKey Business Super commenced on 30 April 2001 and issues the same unit price as that reported for MLC MasterKey Superannuation Gold Star. The returns outlined above do not include allowance for fee rebates you may be entitled to should you be part of a large employer plan.

-23.49.6-5.0 -7.5

Slide 25

Page 26: MLC investment performance review

Australian property – total returnsHistorical Absolute Performance

MLC MasterKey Super Gold Star Property Securities Fund (after taking into account fees and tax)

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

Ret

urn

% p

.a.

5 Years Ended 31 December 1 Year Ended 31 December

Slide 26

Page 27: MLC investment performance review

Rolling Performance in Excess of the IndexMLC Property Securities Fund

(before taking into account fees and tax)

-6%

-4%

-2%

0%

2%

4%

6%

8%

De

c-9

0

Ju

n-9

1

De

c-9

1

Ju

n-9

2

De

c-9

2

Ju

n-9

3

De

c-9

3

Ju

n-9

4

De

c-9

4

Ju

n-9

5

De

c-9

5

Ju

n-9

6

De

c-9

6

Ju

n-9

7

De

c-9

7

Ju

n-9

8

De

c-9

8

Ju

n-9

9

De

c-9

9

Ju

n-0

0

De

c-0

0

Ju

n-0

1

De

c-0

1

Ju

n-0

2

De

c-0

2

Ju

n-0

3

De

c-0

3

Ju

n-0

4

De

c-0

4

Ju

n-0

5

De

c-0

5

Ju

n-0

6

De

c-0

6

Ju

n-0

7

De

c-0

7

Ju

n-0

8

De

c-0

8

Ju

n-0

9

De

c-0

9

An

nu

ali

se

d E

xc

es

s R

etu

rn

(S&

P/A

SX

30

0 L

PT

In

de

x)

1 Year 3 Years 5 Years

Australian property– excess returns

• Outstanding long term performance track record, even more so in the last 2-3 years when the sector has been in crisis.

• Astute stock selection, predominantly by Resolution (70% of the strategy). Their preference for REITs with strong cashflows, balance sheets, management and quality property have been very rewarding.

• MLC’s decision to allow Resolution to own a component of their mandate in non-Australian REITs has also been beneficial as it has allowed Resolution to select GREITs with the characteristics they prefer, and in more plentiful supply than is a available in Australia. Slide 27

Page 28: MLC investment performance review

Australian property – manager contribution

Contributors:• Avoiding the worst of the disasters in the sector (too many to mention!)• Focus on quality REITs • Inclusion of global REITs which performed better than most AREIT

Detractors:• Magnitude of excess returns has declined in the last few months as the market’s risk

appetite has risen and price performance of poorer quality REITs has improved.

• •

Manager Performance in Excess of the IndexMLC Property Securities Fund

(before taking into account fees and tax)

0%

1%

2%

3%

4%

5%

6%

Resolution Capital Challenger Property Securities Fund

Ex

ce

ss

Re

turn

vs

S&

P/A

SX

30

0 L

PT

In

de

x(A

nn

ua

lised

fo

r p

eri

od

s g

reate

r th

an

1 y

ear)

Quarter to Dec-09 1 Year to Dec-09 3 years to Dec-09 5 Years to Dec-09

Slide 28

Page 29: MLC investment performance review

3. Drill down by asset class

Global property

Page 30: MLC investment performance review

Global property - performance

Highlights:• MLC global property performance has exceeded index over all periods reviewed. • Consistent manager outperformers have been Resolution Capital and Morgan Stanley while LaSalle has lagged (more diversified portfolio with a higher US exposure). Preference for GREITs with quality cash flow, balance sheets and management have clearly helped. • Particularly beneficial over the year has been ownership of Asian REITs, especially Hong Kong (Link REIT), Singapore and Japan as well as selected REITS Unibail (France).•Like Australia, massive capital raisings ($50bn) have helped stabilise the sector.

MLC Global Property Fund

Performance to 3 Months 1 Year 3 Years 5 Years31-Dec-09 % % % p.a. % p.a.MLC MasterKey Super Fundamentals(before taking into account fees and tax)MLC MasterKey Super Fundamentals(takes into account fees and tax)UBS Global Investors Index (hedged) 5.3 29.1 -15.6 n/a

6.5 -12.9 n/a

5.0

35.2

--33.0

Slide 30

Page 31: MLC investment performance review

Global property – excess returns

Rolling Performance in Excess of the IndexMLC Global Property Fund

(before taking into account fees and tax)

-4%

-2%

0%

2%

4%

6%

8%

Se

p-0

6

Ma

r-0

7

Se

p-0

7

Ma

r-0

8

Se

p-0

8

Ma

r-0

9

Se

p-0

9

An

nu

alis

ed

Ex

ce

ss

Re

turn

U

BS

Re

al E

sta

te In

ve

sto

rs T

rus

t In

de

x (

he

dg

ed

)

1 Year 3 Years

Slide 31

Page 32: MLC investment performance review

Global property – manager contribution

Contributors:• Morgan Stanley’s and Resolution’s preference for Asian based REITs who have

generally outperformed the rest of the world for much of the last 1-2 years. For example, Link in Hong Kong.

• Selective holdings of other REITs with strong individual characteristics (Simon Property Group in the US, Unibail-Rodamco in France, British Land and Land Securities in UK).

Detractors:• La Salle’s decision to have a higher exposure to US REITs and less exposure to Asia. • • •

Manager Performance in Excess of the IndexMLC Global Property Fund

(before taking into account fees and tax)

-10%

-5%

0%

5%

10%

15%

20%

LaSalle InvestmentManagement

Morgan Stanley Resolution Global Property Fund

Excess R

etu

rn v

s U

BS

Real

Esta

te I

nvesto

rs T

rust

Ind

ex

(un

hed

ged

)(a

nn

ua

lis

ed

fo

r p

eri

od

s g

rea

ter

tha

n 1

ye

ar)

Quarter to Dec-09 1 Year to Dec-09 3 years to Dec-09 5 Years to Dec-09

Slide 32

Page 33: MLC investment performance review

3. Drill down by asset class

Global private equity

Page 34: MLC investment performance review

Global private assets – performance

Highlights:• MLC Global Private Equity strategy out-performed public markets index over the quarter and longer 3 and 5 year terms. The 1-year return is extremely low due to the delay in which valuations of underlying investments are fed into the returns.•Worst of the portfolio valuations are now in and we expect some moderation over the next two quarters. Our excellent performance is due to the higher quality assets and diversification of the portfolio across 2000 investments world wide.• Program remains well diversified and we are now seeking more direct investments, thereby saving fees in accessing opportunities.•Listed market performance is essential for deals looking at exits, and valuations will need to hold for the overall PE market to fully normalise.

MLC Global Private Assets

Performance to 3 Months 1 Year 3 Years 5 Years31-Dec-09 % % % p.a. % p.a.MLC Global Private Assets(diversified fund component,before taking into account fees and tax)MSCI All Country World Index Hedged into AUD (MSCI World Index Hedged prior to July 2002)

4.5

11.2-9.16.4 6.4

-4.732.45.9

Slide 34

Page 35: MLC investment performance review

3. Drill down by asset class

Long Term Absolute Return Strategy

Page 36: MLC investment performance review

Long Term Absolute Return – performance

Highlights:• Exposure to growth assets helped overall returns get back to positive levels, across shorter time horizons.•Increased gearing mid –year, had a positive impact.

MLC Long-Term Absolute Return Portfolio

Performance to 3 Months 1 Year 3 Years 5 Years31-Dec-09 % % % p.a. % p.a. MLC MasterKey Super Fundamentals / Gold Star / Business Super

(before taking into account fees and tax)

MLC MasterKey Super Fundamentals(after taking into account fees and tax) MLC MasterKey Super Gold Star / Business Super*(after taking into account fees and tax)

MLC LTAR Neutral Strategy

(before taking into account fees and tax)

Inflation (CPI) 0.5 1.7 2.8 -

*MLC MasterKey Business Super commenced on 5 December 2005 and issues the same unit price as that reported for MLC MasterKey Superannuation Gold Star. The returns outlined above do not include allowance for fee rebates you may be entitled to should you be part of a large employer plan.

4.4

4.2

--18.9

--2.218.1

--6.333.26.0

-1.021.35.4

Slide 36

Page 37: MLC investment performance review

3. Drill down by asset class

Diversified Debt

Page 38: MLC investment performance review

Diversified Debt assets - performance

Highlights:•The strategy produced a very healthy return this year, rebounding from the dismal return it produced in 2008.•Maintaining exposure to higher credit risk securities, when markets were at their extreme, did not take long to pay-off.

MLC Diversified Debt Fund

Performance to 3 Months 1 Year 3 Years 5 Years31-Dec-09 % % % p.a. % p.a.MLC MasterKey Super Fundamentals(before taking into account fees and tax)MLC MasterKey Super Fundamentals(takes into account fees and tax)50% UBS Composite Bond Index (All Maturities)and 50% Barclays Capital Global Aggregate Bond Index (hedged)

6.4

-1.6

1.2

4.91.1

8.9 -

7.3

--6.1

Slide 38

Page 39: MLC investment performance review

Diversified Debt – excess returns

Rolling Performance in Excess of the IndexMLC Diversified Debt Fund

(before taking into account fees and tax)

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

Jun-

08

Dec

-08

Jun-

09

Dec

-09

An

nu

alis

ed E

xces

s R

etu

rn A

bo

ve

50%

UB

S C

om

p B

on

d /

50%

BC

GA

In

dex

Quarter 1 Year

Slide 39

Page 40: MLC investment performance review

Diversified Debt – sector contribution

Contributors:• 2009 was completely different to 2008. The sectors with the greatest credit risk paid the highest

returns this year ie real return and global high yield debt. • Returns on the higher risk sectors started rising from March 2009 when confidence started returning

to markets. By the end of 2009 the rewards have been handsome.

Detractors:• Nominal bond sectors had a relatively weak year. With the global economy recovering, the market

started to factor in increases in interest rates. When interest rates rise, the value of bonds fall.• Australian inflation-linked bonds was the only debt sector to produce a negative return this year. The

government increased issuance (supply) of these securities which pushed prices down. Although they are weak in the current environment, inflation-linked bonds provide an excellent hedge when inflation rises.

Contribution to Total Return by Asset ClassMLC Diversified Debt Fund

(before taking into account fees and tax)

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

AustralianNominal Bonds

AustralianInflation Linked

Bonds

Global NominalBonds

Global High YieldDebt

Real ReturnStrategies

Total

Re

turn

Co

ntr

ibu

tio

n %

(an

nu

ali

se

d f

or

peri

od

s g

rea

ter

than

1 y

ea

r)

Quarter to Dec-09 1 Year to Dec-09 3 years to Dec-09

Slide 40

Page 41: MLC investment performance review

Diversified Debt – manager contribution

Contributors:• All but 1 manager exceeded their respective benchmark’s return over the quarter.• Most managers exceeded their benchmark for the year because they maintained their exposure to

higher credit securities during the recovery. • NSIM and UBS outperformed their benchmarks by a considerable margin, boosting returns from one

of the weakest sectors this year.

Detractors:• Bridgewater and BlackRock timed their reduction in exposure to credit risk poorly and did not get all

the upside when markets continued to recover strongly throughout 2009. • Oaktree underpeformed in a sector that produced a massive return this year.

Manager Performance in Excess of the IndexMLC Diversified Debt Fund

(before taking into account fees and tax)

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

NSIM UBS BlackRock Bridgewater PIMCO W. R. Huff Oaktree

AustralianNominal Bonds,

All Maturity

AustralianNominal Bonds,

All Maturity

Global NominalBonds, AllMaturity

Real ReturnStrategy

Real ReturnStrategy

Global High YieldDebt

Global High YieldDebt

Ex

ce

ss

Re

turn

Ab

ov

e M

an

ag

er

Ind

ice

s(a

nn

ua

lise

d f

or

peri

od

s g

rea

ter

tha

n 1

yea

r)

Quarter to Dec-09 1 Year to Dec-09 3 years to Dec-09 5 Years to Dec-09

Slide 41

Page 42: MLC investment performance review

3. Drill down by asset class

IncomeBuilder

Page 43: MLC investment performance review

MLC IncomeBuilderTM - performance

Highlights:• MLC IncomeBuilder outperformed the index over 3 and 5 years but underperformed in the year.• Principal market relative performance detractors in ’09 were u/w CBA, Macquarie, Orica and o/w NAB, Fosters, Brambles, Fairfax Media, Telstra. Note these positions have been made with the primary objective (income growth) in mind (plus MBA’s value preference). Index relative performance is a secondary objective of the Fund. • The Nov. ‘09 quarterly distribution of 1.85c (Unit Trust) was 33.5% below p.c.p. ‘08. This is consistent with a difficult period for corporate earnings in the last 1-2 years due to the economic slowdown and the subsequent decision by many companies to cut dividends (e.g. NAB’s last half year d.p.s. was 25% below p.c.p.)• Even though corporate earnings may begin to recovery this year, dividend growth is expected to lag, so will the growth in IB’s income distributions. Recovery may not be evident until 2011.

MLC IncomeBuilderTM Fund

Performance to 3 Months 1 Year 3 Years 5 Years31-Dec-09 % % % p.a. % p.a.MLC MasterKey Super Fundamentals / Gold Star / Business Super(before taking into account fees and tax)MLC MasterKey Super Fundamentals(takes into account fees and tax)MLC MasterKey Super Gold Star / Business Super*(takes into account fees and tax)S&P/ASX 200 All Industrials Accumulation Index 0.9 33.8 -4.3 5.2

*MLC MasterKey Business Super commenced on 30 April 2001 and issues the same unit price as that reported for MLC MasterKey Superannuation Gold Star.The returns outlined above do not include allowance for fee rebates you may be entitled to should you be part of a large employer plan.

0.3 28.4 -2.7 4.9

0.4 -2.1 6.2

-0.4

32.6

-29.3

Slide 43

Page 44: MLC investment performance review

IncomeBuilder – distribution performance

Highlights:• Fund’s underlying distribution history has been strong (income has fallen in only 2/14 years) • However, 2010 and 2011 will almost certainly see lower income distributions due to dividend cutbacks by companies in response to lower profits (November quarter 2009 distribution 33.5% below 2008’s)•Future capital gains are not easy to forecast as a multitude of factors can impact (takeovers, managers’ stock selection). Note that this is a fund where tax is monitored, considered as part of stock selection decisions and where possible minimised.

1.86 2.46 2.23 2.73 3.04 2.83 2.984.24 4.87

6.74 7.64 8.21 8.71 8.97

1.68

3.59

5.34

0.43

0.35

1.310.99

0.02

0.35

0.08

0

2

4

6

8

10

12

14

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Financial Year End 30 J une

Cen

ts P

er S

hare

Income Buy Backs Total Capital Gains

Slide 44

Page 45: MLC investment performance review

MLC IncomeBuilderTM – manager contribution

Contributors:• o/w ANZ, Mirvac, AXA Asia Pacific U/w QBE Insurance, CSL, Woolworths

Detractors:• o/w Telstra, NAB, Brambles, Fosters, Fairfax Media U/w CBA, Macquarie

Group

Manager Performance in Excess of the Index

MLC IncomeBuilderTM

(before taking into account fees and tax)

-2%

-2%

-1%

-1%

0%

1%

1%

2%

2%

3%

3%

4%

Vanguard Maple-Brown Abbott IncomeBuilderTM

Ex

ce

ss

Re

turn

vs

S&

P/A

SX

20

0 A

ll In

du

str

ials

In

de

x(a

nn

uali

sed

fo

r p

eri

od

s g

reate

r th

an

1 y

ear)

Quarter to Dec-09 1 Year to Dec-09 3 years to Dec-09 5 Years to Dec-09

Slide 45