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MLC Investment Management Detailed performance Appendix: Wholesale. 31 December 2010. General advice warning and disclaimer. This information has been provided by MLC Limited (ABN 90 000 000 402) a member of the National Group, 105–153 Miller Street, North Sydney 2060. - PowerPoint PPT Presentation
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Slide 1
MLC Investment ManagementDetailed performance
Appendix: Wholesale
31 December 2010
Slide 2
General advice warning and disclaimer
This information has been provided by MLC Limited (ABN 90 000 000 402) a member of the National Group, 105–153 Miller Street, North Sydney 2060.
Any opinions expressed in this communication constitute our judgement at the time of issue and are subject to change. We believe that the information contained in this communication is correct and that any estimates, opinions, conclusions or recommendations are reasonably held or made as at the time of compilation. However, no warranty is made as to their accuracy or reliability (which may change without notice) or other information contained in this communication.
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 performance reported is before management fees and taxes, unless otherwise stated.
The specialist investment managers are current as at the date this communication was prepared. Investment managers are regularly reviewed and may be appointed or removed at any time without prior notice to you.
This communication contains general information and may constitute general advice. Any advice in this communication has been prepared without taking account of individual objectives, financial situation or needs. It should not be relied upon as a substitute for financial or other specialist advice.
Before making any decisions on the basis of this communication, you should consider the appropriateness of its content having regard to your particular investment objectives, financial situation or individual 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 [include AFSL for PDSs/FSGs/Annual Reports]) 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.
Slide 3
Agenda
1. Economic and Market Environment
2. MLC Horizon Performance
3. Asset Class Performance
Slide 3
Slide 4
1. Market & Economic Environment
• Global Prospects
• Cautiously optimistic about prospects for global growth, but it remains a highly uncertain environment
• Modest rates of developed world growth (de-leveraging process) but no new recession (The macro news is not all bad)
• Emerging markets drive global growth (many EMs had a good GFC!)
• A more conservative investment environment (transparency, liquidity)
• Modest investment returns, heightened volatility
Slide 5
G4 growth: worst recession in decades followed by anaemic recovery
Source: Datastream
US
-6-4-20246
Q1 1999 Q1 2002 Q1 2005 Q1 2008
q/q%
y/y%
Growth in real GDP %
Eurozone
-6.0-4.0-2.00.02.04.06.0
Q1 1999 Q1 2002 Q1 2005 Q1 2008
q/q%
y/y%
Growth in real GDP %
Japan
-12.5-10.0
-7.5-5.0-2.50.02.55.07.5
Q1 1999 Q1 2002 Q1 2005 Q1 2008
q/q%
y/y%
Growth in real GDP %
UK
-8.0-6.0-4.0-2.00.02.04.06.0
Q1 1999 Q1 2002 Q1 2005 Q1 2008
q/q%
y/y%
Growth in real GDP %
Note: Data provided to 31 December 2010
Slide 6
Business conditions and consumer confidence
G3 Economy-wide* Business Conditions
-4
-3
-2
-1
0
1
2
Q2 1997 Q2 2000 Q2 2003 Q2 2006 Q2 2009
US EA-16 Japan
Deviations from long-term average
*weighted average of manufacturing and non-manufacturing/services indices
G3 Consumer sentiment
-4
-3
-2
-1
0
1
2
3
Q2 1997 Q2 2000 Q2 2003 Q2 2006 Q2 2009
US EA-16 Japan
Deviations from long-term average
Source: Datastream, MLC Investment Management
American confidence still
very subdued
Note: Data provided to 31 December 2010
Slide 7
It’s the labour market stupid
Source: Datastream.
No net growth in US employment since 2000
120000
125000
130000
135000
140000
Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10
Non-farm payrolls '000
Working part-time due to poor business conditions
0
1
2
3
4
5
Jan-70 Jan-77 Jan-84 Jan-91 Jan-98 Jan-05
Involuntary part-time due to bus conds (as % of lab. force)
US unemployment rate
0
2
4
6
8
10
12
Jan-70 Jan-77 Jan-84 Jan-91 Jan-98 Jan-05
% of labour force
Discouraged worker numbers have soared
0.00
0.20
0.40
0.60
0.80
1.00
Jan-94 Jan-97 Jan-00 Jan-03 Jan-06 Jan-09
Discouraged workers as % of labour force
Note: Data provided to 31 December 2010
Slide 8
V-shaped cycle in emerging markets
Industrial production
80
85
90
95
100
105
110
115
120
125
130
Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010
Asia
LATAM
Brazil
Eastern Europe
Q2 2008 equals 100
Exports
60
70
80
90
100
110
120
130
Q2 2008 Q4 2008 Q2 2009 Q4 2009 Q2 2010 Q4 2010
Asia
LATAM
Brazil
Eastern Europe
Q2 2008 equals 100
Source: Datastream, MLC Investment Management
Note: Data provided to 31 December 2010
Slide 9
Chinese and Indian growth remains staggering
0
2
4
6
8
10
12
14
16
Q2 2005 Q2 2006 Q2 2007 Q2 2008 Q2 2009 Q2 2010
ChinaIndia
Real GDP y/y%
Source: Datastream, MLC Investment Management Note: Data provided to 31 December 2010
Slide 10
Australian Prospects
• Massive terms of trade boost, huge pipeline of construction work, BUT..– Monetary and fiscal policy are being tightened– Strong $A is a two-edged sword– Consumers are confident, but are spending very cautiously– Global environment is still fragile
• Two-speed economy returns – WA, Queensland set to outperform?
• Queensland floods will detract from near-term growth, but rebuilding will add significantly to growth over the next year and beyond.
Slide 11
Consumers confident but cautious?
Note: Data provided to 31 December 2010
Slide 12
MLC Horizon 4 Balanced Portfolio
Slide 12
Source: MLC Investment Management
Highlights:• Returns for the December quarter built on the previous quarters solid results, with leading indicators in the US suggesting
growth is picking up in the worlds largest economy.• The strong second half of the year (+8.7% before fees and taxes) more than offset the weak first half, with MLC Horizon 4
posting lacklustre, but nonetheless positive 1 year returns.• As at December, MLC Horizon 4 is above median over all time periods. Additionally, over 1 year the fund is firmly positioned
in the 1st quartile, highlighting the significant rebound in MLC’s returns post the global financial crisis.• Over the quarter the standout strategies were Global REITS (+7.0%) and Hedged Global Shares (+8.4%), both benefited
from currency hedging, with the Australian Dollar rising 5.8% over the period. Both these strategies were also amongst the top performers for the year, recording +23.9% and +14.3% respectively.
• Our strategic allocation to Australian inflation linked bonds was the strongest performing debt sector in Australia. With inflation rates rising, performance was strong, recording 8.1% (before fees and taxes) for the year.
MLC Wholesale Horizon 4 - Balanced Growth Portfolio
Performance Overview to 3 Months 1 Year 3 Years 5 Years 10 Years31-Dec-10 % % % p.a. % p.a. % p.a.MLC Wholesale/Masterkey Investment Service Fundamentals(takes into account fees)
4.82.33.0 4.7 -2.4
Slide 13
MLC Horizon 4 Balanced Portfolio– total returns
Source: MLC Investment Management
2. MLC Horizon Performance
Historical Absolute PerformanceMLC Wholesale Horizon 4 Balanced Portfolio
(after taking into account fees)
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Re
turn
% p
.a.
1 Year Ended 31 December 5 Years Ended 31 December
• 5 year returns have always been positive• 5 year returns have always been positive
Slide 14
MLC Horizon 4 strategy – asset class contribution
Source: MLC Investment Management
Contribution to Total Return by Asset ClassMLC Wholesale Horizon 4 Balanced Portfolio
(before taking into account fees)
-2
-1
0
1
2
3
4
5
6
7
AustralianShares
Global Shares -Hedged
Global Shares -Unhedged
Global PropertySecurities
LTAR Debt Securities Total
Ret
urn
Co
ntr
ibu
tio
n %
(an
nu
alis
ed f
or
per
iod
s g
rea
ter
than
1 y
ear)
3 months to Dec-2010 1 year to Dec-2010 3 years to Dec-2010 5 years to Dec-2010
Slide 15
MLC Horizon 4 Balanced Portfolio – peer relative performance
MLC Wholesale Horizon 4 Balanced PortfolioComparison with the Mercer Wholesale-Balanced Growth Universe
Performance before tax and after fees for periods ended December 2010Rates of Return(%)
8
4
0
-4
-8
3 Months (% ) 1 Year (% ) 3 Years (% pa) 5 Years (% pa) 7 Years (% pa)
MLC0260AU 3.0 (17) 4.7 (9) -2.2 (15) 2.3 (19) 6.2 (17)
95th Percentile 4.0 6.3 -1.0 3.7 7.1Upper Quartile 3.3 4.4 -2.0 2.8 6.5
Median 3.0 3.2 -2.7 2.2 6.2Lower Quartile 2.6 2.6 -4.0 1.5 5.65th Percentile 2.1 1.2 -5.8 0.8 5.1
Number of Funds 45 44 41 41 38
Data Source: Morningstar and Lipper, A Thomson Reuters Company
Q2Q1
Q2
Q2
Q2
*Based on Mercer Wholesale – Balanced Growth universe historical data to 31 December 2010.
Slide 16
MLC Horizon 5 Growth Portfolio
Slide 16
Source: MLC Investment Management
Highlights:• Returns for the December quarter built on the previous quarters solid results, with leading indicators in the US suggesting growth is
picking up in the worlds largest economy.• The strong second half of the year (+9.7% before fees and taxes) more than offset the weak first half with MLC Horizon 5 posting
lacklustre, but nonetheless positive 1 year returns.• As at December, MLC Horizon 5 is above median over 1and 3 years. Over longer time periods the portfolio is slightly below median,
caused by the relative overweight to Global Equity (which has underperformed Australian markets over the last decade – a situation MLC does not expected to re-occur¹)
• Over the quarter the standout strategies were Global REITS (+7.0%) and Hedged Global Shares (+8.4%), both benefited from currency hedging, with the Australian Dollar rising 5.8% over the period. Both these strategies were also amongst the top performers for the year, recording +23.9% and +14.3% respectively.
• Our strategic allocation to Australian inflation linked bonds was the strongest performing debt sector in Australia. With inflation rates rising, performance was strong, recording 8.1% (before fees and taxes) for the year.
MLC Wholesale Horizon 5 - Growth Portfolio
Performance Overview to 3 Months 1 Year 3 Years 5 Years 10 Years(before taking into account fees)MLC Wholesale/Masterkey Investment Service Fundamentals(takes into account fees)
-
4.0-4.5 1.34.13.7
2.3-3.75.03.8
¹ Refer to MLC Strategic Overlay for asset class risk and return expectations
Slide 17
MLC Horizon 5 Growth Portfolio – total returns
Source: MLC Investment Management
Historical Absolute PerformanceMLC Wholesale Horizon 5 Growth Portfolio
(after taking into account fees)
-40%
-30%
-20%
-10%
0%
10%
20%
30%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Re
turn
% p
.a.
1 Year Ended 31 December 5 Years Ended 31 December
• 5 year returns have always been positive• 5 year returns have always been positive
Slide 18
MLC Horizon 5 strategy– asset class contribution
Source: MLC Investment Management
Contribution to Total Return by Asset ClassMLC Wholesale Horizon 5 Growth Portfolio
(before taking into account fees)
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
AustralianShares
Global Shares -Hedged
Global Shares -Unhedged
Global PropertySecurities
LTAR Debt Securities Total
Re
turn
Co
ntr
ibu
tio
n %
(an
nu
alis
ed f
or
pe
rio
ds
gre
ater
th
an
1 y
ear)
3 months to Dec-2010 1 year to Dec-2010 3 years to Dec-2010 5 years to Dec-2010
Slide 19
MLC Horizon 5 Growth Portfolio – peer relative performance
MLC Wholesale Horizon 5 Growth PortfolioComparison with the Mercer Wholesale-High Growth Universe
Performance before tax and after fees for periods ended December 2010Rates of Return(%)
8
3
-2
-7
-12
3 Months (% ) 1 Year (% ) 3 Years (% pa) 5 Years (% pa) 7 Years (% pa)
MLC0265AU 3.7 (11) 4.1 (8) -4.3 (7) 1.3 (13) 5.9 (9)
95th Percentile 4.7 5.7 -2.7 2.9 7.5Upper Quartile 3.9 4.4 -4.1 2.2 6.5
Median 3.7 3.0 -4.9 1.8 6.0Lower Quartile 3.4 1.7 -6.3 1.0 5.55th Percentile 2.6 0.6 -9.8 -0.2 4.9
Number of Funds 23 23 22 18 14
Data Source: Morningstar and Lipper, A Thomson Reuters Company
Q2
Q2
Q2
Q3
Q3
*Based on Mercer Wholesale – High Growth universe historical data to 31 December 2010.
Slide 20
MLC Horizon 6 Share Portfolio
Slide 20
Source: MLC Investment Management
Highlights:• Returns for the December quarter built on the previous quarters solid results, with leading indicators in the US
suggesting growth is picking up in the worlds largest economy.• The strong second half of the year (+11.2% before fees and taxes) more than offset the weak first half with MLC Horizon
6 posting lacklustre, but nonetheless positive 1 year returns.• As at December, MLC Horizon 6 is predominantly above median. Additionally over 1 and 7 years the fund is firmly
positioned in the 1st quartile.• Over the quarter the standout strategy was Hedged Global Shares (+8.4%) which benefited from currency hedging, with
the Australian Dollar rising 5.8% over the period. This strategy was also amongst the top performers for the year, recording +14.3%.
• Other noteworthy performance came from LTAR which finished the year strongly recording +4.2%, returns since inception remain well ahead of the neutral strategy, with the portfolio delivering annualised outperformance of 4.1%.
MLC Wholesale Horizon 6 - Share Portfolio
Performance Overview to 3 Months 1 Year 3 Years 5 Years31-Dec-10 % % % p.a. % p.a.MLC Wholesale/Masterkey Investment Service Fundamentals(takes into account fees)
3.7 0.8-6.24.5
Slide 21
MLC Horizon 6 Share Portfolio– total returns
Source: MLC Investment Management
Historical Absolute PerformanceMLC Wholesale Horizon 6 Share Portfolio
(after taking into account fees)
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
2003 2004 2005 2006 2007 2008 2009 2010
Re
turn
% p
.a.
1 Year Ended 31 December 5 Years Ended 31 December
Slide 22
MLC Horizon 6 strategy– asset class contribution
Source: MLC Investment Management
Contribution to Total Return by Asset ClassMLC Wholesale Horizon 6 Share Portfolio
(before taking into account fees)
-8
-6
-4
-2
0
2
4
6
Australian Shares Global Shares -Hedged
Global Shares -Unhedged
LTAR Total
Re
turn
Co
ntr
ibu
tio
n %
(an
nu
alised
fo
r p
eri
od
s g
reate
r th
an
1 y
ear)
3 months to Dec-2010 1 year to Dec-2010 3 years to Dec-2010 5 years to Dec-2010
Slide 23
MLC Horizon 6 Share Portfolio – peer relative performance
MLC Wholesale Horizon 6 Share PortfolioComparison with the Mercer Wholesale-All Growth Universe
Performance before tax and after fees for periods ended December 2010Rates of Return(%)
7
2
-3
-8
-13
3 Months (% ) 1 Year (% ) 3 Years (% pa) 5 Years (% pa) 7 Years (% pa)
MLC0397AU 4.5 (7) 3.7 (5) -6.2 (9) 0.8 (9) 5.9 (2)
95th Percentile 5.5 5.7 -2.9 2.9 6.0Upper Quartile 4.6 3.7 -5.6 1.4 5.9
Median 4.4 2.7 -6.2 1.0 5.6Lower Quartile 3.8 1.3 -7.3 0.4 5.15th Percentile 2.5 -1.1 -9.0 -1.6 3.5
Number of Funds 18 18 17 16 10
Data Source: Morningstar and Lipper, A Thomson Reuters Company
Q2
Q1
Q2
Q3
Q1
*Based on Mercer Wholesale – All Growth universe historical data to 31 December 2010.
Slide 24
MLC Australian Share Fund - performance
Source: MLC Investment Management
Highlights:• The market’s return was disappointingly low for the year (+1.9%) and relatively poor compared to some major global markets (e.g.
US +12.8%, UK +9%, Germany +16.1% in local currency terms). Note this follows a +37% return in 2009.• The market return has remained narrowly based with resources & mining related companies, particularly small-medium sized
miners, the best performers (e.g. OZ Minerals +45%, Iluka +155%, Alumina +35%). The performance gap between the ASX300 Resources and Industrials indices was wide (15%) with most industrial sectors losing ground.
• For the year, two managers outperformed (Dimensional & JCP Investment Partners) with JCP by far the best (5.3% above index) due in part to their ownership of selected medium sized mining companies.
• Market events this year highlight the worth of a multi-manager approach – some managers have captured the return upside of resources while others have focused on the industrial stocks who have been left behind (“buying straw hats in winter”).
• Looking ahead, most of MLC’s managers are predicting a better year for the market, depending on whether consensus 2012 earnings growth forecasts (currently +14%) prove to be too optimistic and are revised down. Valuation of industrials look especially attractive.
3. Asset Class Funds Performance
MLC Wholesale Australian Share Fund
Performance to 3 Months 1 Year 3 Years 5 Years31-Dec-10 % % % p.a. % p.a.MLC Wholesale/Masterkey Investment Service Fundamentals(takes into account fees)S&P/ASX 300 Accumulation Index(S&P/ASX 200 Index prior to Nov 2002)
3.6 -4.7 3.5-0.2
-5.01.94.7 4.4
Slide 25
MLC Australian Share Fund – total returns
Source: MLC Investment Management
Historical Absolute PerformanceMLC Wholesale Australian Share Fund
(after taking into account fees)
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Ret
urn
% p
.a.
1 Year Ended 31 December 5 Years Ended 31 December
Slide 26
Australian shares strategy – excess returns
Source: MLC Investment Management
Rolling Performance in Excess of the IndexAustralian Share Strategy
(before taking into account fees and tax)
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
Ma
r-9
1S
ep
-91
Ma
r-9
2S
ep
-92
Ma
r-9
3S
ep
-93
Ma
r-9
4S
ep
-94
Ma
r-9
5S
ep
-95
Ma
r-9
6S
ep
-96
Ma
r-9
7S
ep
-97
Ma
r-9
8S
ep
-98
Ma
r-9
9S
ep
-99
Ma
r-0
0S
ep
-00
Ma
r-0
1S
ep
-01
Ma
r-0
2S
ep
-02
Ma
r-0
3S
ep
-03
Ma
r-0
4S
ep
-04
Ma
r-0
5S
ep
-05
Ma
r-0
6S
ep
-06
Ma
r-0
7S
ep
-07
Ma
r-0
8S
ep
-08
Ma
r-0
9S
ep
-09
Ma
r-1
0S
ep
-10
An
nu
ali
se
d E
xc
es
s R
etu
rn
(S&
P/A
SX
30
0 A
cc
um
ula
tio
n I
nd
ex
)
1 Year to Dec 2010 3 years to Dec 2010 5 Years to Dec 2010
Consistency of strategy outperformance1 year 65%3 year 75%5 year 81%
Slide 27
Australian shares strategy – manager contribution
Contributors for the year:• JCP Investment Partners and Dimensional outperformed. JCP’s strongest performance contributors versus index were
overweight InToll (takeover target), Independence Group, Newcrest Mining, CSL and Whitehaven Coal. • Dimensional’s returns benefited from the performance superiority of small companies as well as Amcor, Incitec-Pivot and
Alumina
Detractors for the year:• Maple-Brown Abbott, Balanced Equity Management, Concord Capital, Wallara, Northward Capital and Northcape all
underperformed.
Source: MLC Investment Management
Manager Performance in Excess of the IndexAustralian Share Strategy
(before taking into account fees and tax)
-6%
-4%
-2%
0%
2%
4%
6%
Maple-BrownAbbott
Lazard Dimensional Contango Concord JCP Wallara BalancedEquity
Northcape NorthwardCapital
AustralianShare Fund
Exc
ess
Ret
urn
vs
S&
P/A
SX
30
0 A
ccu
mu
lati
on
In
de
x(a
nn
ual
ised
fo
r p
erio
ds
gre
ater
th
an 1
yea
r)
Quarter to Dec-10 1 Year to Dec-10 3 years to Dec-10 5 Years to Dec-10
Slide 28
MLC Global Share Fund - performance
Highlights:• Global share investors had to endure another indifferent period with absolute returns being slightly
negative for the year driven by the worries over the global economy and a rising Australian dollar.• The strategy again benefited from exposure to Emerging Markets, not only through locally listed
companies but also Multi-nationals sourcing revenue from these regions. Emerging Markets outperformed developed markets by over 5%.
• The strategy remains defensively positioned, in view of manager consensus about global uncertainty. With the risk rally seemingly over, better capitalised companies with monopoly businesses and products should do better moving forward. The portfolio is suitably positioned to take advantage of this.
• The portfolio’s defensive characteristics were a drag on performance, especially during the last quarter when global share markets, led by the US, rallied substantially.
• With corporate cash levels near record highs 2011 is likely to see high levels of mergers and acquisitions as companies look to deploy their capital.
Source: MLC Investment Management
MLC Wholesale Global Share Fund
Performance to 3 Months 1 Year 3 Years 5 Years31-Dec-10 % % % p.a. % p.a.MLC Wholesale/Masterkey Investment Service Fundamentals(takes into account fees)MSCI All Country World Index(MSCI World Index prior to July 2002)
-4.5
-2.8-8.6-0.72.8
2.7 -10.2-1.1
Slide 29
MLC Hedged Global Share Fund - performance
Highlights:• Absolute returns were positive for the quarter and year driven by the rising Australian dollar ($A). • The $A had another strong year, it was up +8.8% when measured against a basket of currencies.• Global share investors had to endure another indifferent period with absolute returns being slightly negative for the
year driven by the worries over the global economy.• The strategy again benefited from exposure to Emerging Markets, not only through locally listed companies, but
also Multi-nationals sourcing revenue from these regions. Emerging Markets outperformed developed markets by over 5%.
• The strategy remains defensively positioned, in view of manager consensus about global uncertainty. With the risk rally seemingly over, better capitalised companies with monopoly businesses and products should do better moving forward. The portfolio is suitably positioned to take advantage of this.
• The portfolio’s defensive characteristics were a drag on performance, especially during the last quarter when global share markets, led by the US, rallied substantially.
• With corporate cash levels near record highs 2011 is likely to see high levels of mergers and acquisitions as companies look to deploy their capital.
Source: MLC Investment Management
MLC Wholesale Hedged Global Share Fund
Performance to 3 Months 1 Year 3 Years 5 Years31-Dec-10 % % % p.a. % p.a.MLC Wholesale/Masterkey Investment Service Fundamentals(takes into account fees)MSCI All Country World Index Hedged into AUD (MSCI World Index Hedged prior to July 2002)
7.8 --7.013.3
3.3-3.414.19.1
Slide 30
MLC Global Share Fund – total returns
Source: MLC Investment Management
Historical Absolute PerformanceMLC Wholesale Global Share Fund
(after taking into account fees)
-40%
-30%
-20%
-10%
0%
10%
20%
30%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Re
turn
% p
.a.
1 Year Ended 31 December 5 Years Ended 31 December
Slide 31
Global shares strategy – excess returns
Source: MLC Investment Management
Rolling Performance in Excess of the IndexGlobal Share Strategy
(before taking into account fees and tax)
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
Ma
r-91
Sep
-91
Ma
r-92
Sep
-92
Ma
r-93
Sep
-93
Ma
r-94
Sep
-94
Ma
r-95
Sep
-95
Ma
r-96
Sep
-96
Ma
r-97
Sep
-97
Ma
r-98
Sep
-98
Ma
r-99
Sep
-99
Ma
r-00
Sep
-00
Ma
r-01
Sep
-01
Ma
r-02
Sep
-02
Ma
r-03
Sep
-03
Ma
r-04
Sep
-04
Ma
r-05
Sep
-05
Ma
r-06
Sep
-06
Ma
r-07
Sep
-07
Ma
r-08
Sep
-08
Ma
r-09
Sep
-09
Ma
r-10
Sep
-10
An
nu
alis
ed E
xce
ss R
etu
rn
(MS
CI
All
Co
un
try
Wo
rld
In
dex
)
1 Year to Dec 2010 3 years to Dec 2010 5 Years to Dec 2010
Consistency of strategy outperformance1 year 55%3 year 59%5 year 61%
Slide 32
Global shares strategy – manager contribution
Contributors for the year:• Sands Capital’s continued excellent performance was on the back of good company selection and being underweight Western Europe
and Developed Asia. The top contributors included Las Vegas Sands, Salesforce.com and Naspers Ltd. • Harding Loevner’s annual performance was aided by stock performance in Health Care, Financial and Consumer Discretionary. • Tweedy, Browne's returns were driven in large part by strong returns in oil and gas holdings, several of the banks and insurance
companies, and machinery stocks. From a regional perspective, the U.S. holdings did well.
Detractors for the year:• Capital International detracted over the year due to security selection across a range of sectors, with Roche (Health care) and Eletricite
De France (Utilities) detracting the most. • Mondrian's security selection in the UK and Europe was a drag for the year. BP and UniCredit were amongst the largest detractors within
the strategy.
Source: MLC Investment Management
Manager Performance in Excess of the IndexGlobal Share Strategy
(before taking into account fees and tax)
-10%
-5%
0%
5%
10%
15%
CapitalInternational
Carnegie 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
ua
lis
ed
fo
r p
eri
od
s g
rea
ter
tha
n 1
ye
ar)
Quarter to Dec-10 1 Year to Dec-10 3 years to Dec-10 5 Years to Dec-10
Slide 33
MLC Property Securities Fund - performance
Highlights:• Sector returns remain subdued even though REITs’ financials are back on solid ground and
business as usual activity (property transactions, development activity, mergers & acquistions) is more evident. The AREIT sector return lagged that of most global REIT markets.
• Three and five year returns remain in negative territory.• Quarter and 1 year Fund returns generally in line with index and significantly better for 3 & 5
year periods.• Good stock selection by Resolution Capital (overweight Challenger Diversified,
underweighting Mirvac, Commonwealth Property Office Fund and nil exposure to Centro Properties and Valad Property Group) was beneficial in addition to the ownership of non-Australian REITs Link REIT (Hong Kong), Hong Kong Land (Singapore listed), Hufvudstaden (Denmark) and Aeon Mall (Japan).
Source: MLC Investment Management
MLC Wholesale Property Securities Fund
Performance to 3 Months 1 Year 3 Years 5 Years31-Dec-10 % % % p.a. % p.a.MLC Wholesale/Masterkey Investment Service Fundamentals(takes into account fees)S&P/ASX 300 Property Accumulation Index(S&P/ASX 200 Property Index prior to Nov 2006)
0.3-0.9 -17.0 -7.0
-21.4-0.7-1.2 -9.8
Slide 34
MLC Property Securities Fund – total returns
Source: MLC Investment Management
Historical Absolute PerformanceMLC Wholesale Property Securities Fund
(after taking into account fees)
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
5 Y
ea
r R
etu
rn %
p.a
.
1 Year Ended 31 December 5 Years Ended 31 December
Slide 35
Australian property strategy – excess returns
Source: MLC Investment Management
Rolling Performance in Excess of the IndexAustralian Property Securities Strategy(before taking into account fees and tax)
-6%
-4%
-2%
0%
2%
4%
6%
8%
Ma
r-9
1S
ep
-91
Ma
r-9
2S
ep
-92
Ma
r-9
3S
ep
-93
Ma
r-9
4S
ep
-94
Ma
r-9
5S
ep
-95
Ma
r-9
6S
ep
-96
Ma
r-9
7S
ep
-97
Ma
r-9
8S
ep
-98
Ma
r-9
9S
ep
-99
Ma
r-0
0S
ep
-00
Ma
r-0
1S
ep
-01
Ma
r-0
2S
ep
-02
Ma
r-0
3S
ep
-03
Ma
r-0
4S
ep
-04
Ma
r-0
5S
ep
-05
Ma
r-0
6S
ep
-06
Ma
r-0
7S
ep
-07
Ma
r-0
8S
ep
-08
Ma
r-0
9S
ep
-09
Ma
r-1
0S
ep
-10
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 to Dec 2010 3 years to Dec 2010 5 Years to Dec 2010
Consistency of strategy outperformance1 year 79%3 year 93%5 year 94%
Slide 36
MLC Global Property Fund - performance
Highlights:• The GREIT sector continues to perform strongly with most markets performing well – Japan +29.5%,
US +28.4%, Europe +17.2%, Singapore +12.5%, UK +6.6%• Sector fundamentals are attractive: GREIT financials are generally in good shape; debt and equity
fund sources have improved; and the property supply/demand equation is favourable.• December quarter returns were in line with index in the quarter with Morgan Stanley the standout
performer of the three appointed managers.• For the year the after fees and tax return lagged the benchmark. Resolution and Morgan Stanley
outperformed their respective benchmarks while LaSalle’s portfolio, which tends to be more diversified, underperformed slightly.
• The Fund’s largest stock holdings versus index continues to be dominated by Asian REITs and Real Estate Operating Companies, including Mitsubishi Estate (Japanese property developer and property manager), Hong Kong Land Holdings (Singapore listed office stock), Sun Hung Kai Properties (Hong Kong developer), Mitsui Fudosan (Japan real estate developer and manager) and Kerry Properties (Hong Kong property developer).
Source: MLC Investment Management
MLC Wholesale Global Property Fund
Performance to 3 Months 1 Year 3 Years 5 Years31-Dec-10 % % % p.a. % p.a.MLC Wholesale/Masterkey Investment Service Fundamentals(takes into account fees)UBS Global Investors Index (hedged) 7.0 23.8 -4.2 0.9*Longer Global Property strategy return history due to presence in Horizon portfolio strategies.
23.47.1 -2.2 -
Slide 37
Global property strategy – excess returns
Source: MLC Investment Management
Rolling Performance in Excess of the IndexGlobal Property Strategy
(before taking into account fees and tax)
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
Oct
-06
Jan
-07
Ap
r-07
Jul-
07
Oct
-07
Jan
-08
Ap
r-08
Jul-
08
Oct
-08
Jan
-09
Ap
r-09
Jul-
09
Oct
-09
Jan
-10
Ap
r-10
Jul-
10
Oct
-10
An
nu
alis
ed
Ex
ces
s R
etu
rn
UB
S R
ea
l Es
tate
Inv
es
tors
Tru
st
Ind
ex
(h
ed
ge
d)
1 Year 3 years 5 years
Consistency of strategy outperformance1 year 84%
3 year 100%5 year 100%
Slide 38
Global property strategy – manager contribution
Source: MLC Investment Management
Manager Performance in Excess of the IndexGlobal Property Strategy
(before taking into account fees and tax)
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
LaSalle InvestmentManagement
Morgan Stanley Resolution Capital Global Property FundEx
ce
ss
Re
turn
vs
UB
S R
ea
l E
sta
te I
nv
es
tors
Tru
st
Ind
ex
(a
nn
ual
ised
fo
r p
erio
ds
gre
ater
th
an 1
yea
r)
Quarter to Dec-10 1 Year to Dec-10 3 years to Dec-10 5 Years to Dec-10
Slide 39
MLC LTAR Portfolio - performance
Highlights:• LTAR returns over the past year have been positive in absolute terms, and are 2.5% ahead
of the neutral strategy. • Given the defensive positioning of the Fund, excess returns were negative over the
September (-1.1%) and December (-0.40%) quarters, on the back of equity market strength. Returns since inception remain ahead of the neutral strategy, with the portfolio delivering annualised outperformance of 2.6%.
• Hedged global equities, Ruffer’s Multi Asset Strategy and hedged global listed property had the strongest returns over the quarter. Bridgewater Pure Alpha not only performed well during the quarter, but was also up 34% for the year. Unhedged global equities continued to lag due to the strength of the Australian dollar.
Source: MLC Investment Management
MLC Wholesale Long-Term Absolute Return Portfolio
Performance to 3 Months 1 Year 3 Years 5 Years31-Dec-10 % % % p.a. % p.a.MLC Wholesale/Masterkey Investment Service Fundamentals(takes into account fees)MLC LTAR Neutral Strategy(before taking into account fees)Inflation (CPI) 0.7 2.8 3.0 3.0
1.4-6.19.35.2
2.810.44.6 -1.3
Slide 40
MLC Diversified Debt Fund – performance
Highlights:• Increased liquidity and low expectations of economic growth prospects led to yields in global government
and non-government bonds falling over the year. In the last quarter yields rose due to expectations of an improvement in economic growth.
• Australian bonds did not fare as well as global markets, with yields rising over the quarter and year. • With yields at historical lows in the US and Japan, the risk of them rising is much higher than falling.
That’s why we continue to maintain our Strategic Overlay position which shortened the duration (interest rate risk) of the Fund’s global government bond exposure early in 2010.
• In October we reduced exposure to non-investment grade bonds (global high yield, banks loans and mortgages) as there is less upside potential from high yield bonds after the extremely strong returns in 2009 and 2010.
Source: MLC Investment Management
MLC Wholesale Diversified Debt Fund
Performance Overview to 3 Months 1 Year 3 Years 5 Years31-Dec-10 % % % p.a. % p.a.MLC Wholesale/Masterkey Investment Service Fundamentals(takes into account fees)50% UBS Composite Bond Index (All Maturities)and 50% Barclays Capital Global Aggregate Bond Index (hedged)
7.7-0.3 - -
--7.60.2
Slide 41
Diversified Debt strategy* – excess returns
Source: MLC Investment Management
* This strategy is for the MLC Diversified Debt Fund only
Rolling Performance in Excess of the IndexDiversified Debt Strategy
(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
Sep
-08
Dec
-08
Mar
-09
Jun-
09
Sep
-09
Dec
-09
Mar
-10
Jun-
10
Sep
-10
Dec
-10
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 to Dec 2010 1 Year to Dec 2010
Slide 42
Diversified Debt strategy* – sector contribution
Contributors:• Falling yields in overseas government bond markets has been a positive environment for the Fund. In the last
quarter, however, as growth expectations improved, yields increased.• Non-government bonds yields also fell over the year which was a positive for the Fund. • The flexible strategy we put in place to manage exposure to debt securities, almost a year ago, has helped the
Fund deliver strong returns at a time when growth assets are weak. The overweight position in non-investment grade bonds contributed positively to returns. We’ve now reduced this position as return potential is no longer as high given the strong returns we’ve captured since the credit crisis.
• Global multi-sector bonds and global high yield bonds outperformed lower risk bonds over the year due to the market’s increasing appetite for risk and desire for higher yield.
Source: MLC Investment Management
Due to changes to the debt strategy (announced 15 February 2010) returns for new debt sectors are only available for the quarter. 1-year returns will be available from March 2011. Due to this, the Global Bond classification represents the longer period return for that sector.
* This strategy is for the MLC Diversified Debt Fund only
Contribution to Total Return by Asset ClassDiversified Debt Strategy
(before taking into account fees and tax)
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
AustralianBonds
Global Bonds GlobalGovernment
Bonds
Global Non-Government
Bonds
Global Multi-Sector Bonds
Global HighYield Bonds
Global BankLoans
GlobalMortgages
Total
Re
turn
Co
ntr
ibu
tio
n %
(an
nu
ali
sed
fo
r p
eri
od
s g
rea
ter
than
1 y
ea
r)
Quarter to Dec-10 1 Year to Dec-10
Slide 43
Diversified Debt strategy* – manager contribution
Contributors:• Although markets weren’t favourable to many of our managers over the quarter, all but three had positive returns. • The Fund has a large exposure to global multi-sector bonds which are flexible mandates allowing managers with
broad debt skills to invest in the sectors they believe will outperform. Franklin Templeton and PIMCO, 2 of the managers in this sector, were stand-outs this quarter and year respectively
• Despite a relatively weak Australian bond market, our Australian bond managers, UBS and Antares, both outperformed their benchmarks over the quarter and year.
• .
Detractors:• One of our strongest performing managers over the year, Oaktree, underperformed their benchmark. When
markets and returns are strong, it’s common for active managers to lag the market as it’s not always quality investments that are driving returns.
Source: MLC Investment Management
Due to changes to the debt strategy (announced 15 February 2010) returns for new managers are only available for the quarter. 1-year returns will be available from March 2011.
* This strategy is for the MLC Diversified Debt Fund only
Manager Absolute PerformanceDiversified Debt Strategy
(before taking into account fees and tax)
-5%
0%
5%
10%
15%
20%
Antares (all-maturities)
UBS (all-maturities)
GoldmanSachs
WellingtonManagement
Rogge Amundi FranklinTempleton
PIMCO W. R. Huff Oaktree ShenkmanCapital
Stone Tower
AustralianBonds
AustralianBonds
GlobalGovernment
Bonds
Global Non-Government
Bonds
Global Non-Government
Bonds
Global Multi-Sector Bonds
Global Multi-Sector Bonds
Global Multi-Sector Bonds
Global HighYield Bonds
Global HighYield Bonds
Global BankLoans
GlobalMortgages
Ma
na
ge
r P
erf
orm
an
ce
%(a
nn
ua
lised
fo
r p
eri
od
s g
rea
ter
than
1 y
ear)
Quarter to Dec-10 1 Year to Dec-10
Slide 44
MLC IncomeBuilderTM Fund - performance
Highlights:• In line with growing evidence of companies raising their dividends (after cutting dividends to
preserve capital during the GFC), the dividend income received by the Fund over the last three quarters was higher than the previous year’s corresponding periods.
• Short term returns after fees and tax were generally less than the market return though are superior for longer periods. The pre-fees and tax returns of both managers were better than index.
• Stock strategies that contributed the most towards the Fund’s index relative returns in the year were overweight Brambles, Fosters Group, and not owning QBE Insurance Group and Macquarie Group.
Source: MLC Investment Management
MLC Wholesale IncomeBuilderTM
Performance to 3 Months 1 Year 3 Years 5 Years31-Dec-10 % % % p.a. % p.a.MLC Wholesale/Masterkey Investment Service Fundamentals(takes into account fees)Growth Return -1.0 -7.0 -10.9 -4.4Distribution Return (assumes reinvestment of income) 1.2 3.9 5.4 6.1S&P/ASX 200 All Industrials Accumulation Index 0.7 -2.5 -7.5 1.4
-3.20.2 -5.6 1.7
Slide 45
MLC IncomeBuilderTM Fund – distribution performance
Source: MLC Investment Management
MLC IncomeBuilderTM Investment Trust (Wholesale) Distribution Analysis
2.30 2.68 3.324.21 4.80
6.417.10 7.52 7.69 7.16
5.73
-
0.58
2.27
3.97
3.78
0.32
3.01
3.96
1.942.37
0.56
0.13
0.250.900.77
0.30
0.04
0.01
0.00--
-
0.000.00
-
2
4
6
8
10
12
14
16
18
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Financial Year End 30 June
Cen
ts p
er u
nit
Underlying Income Taxable Capital Gains Buybacks Consessional (non-taxed) Capital Gains
Slide 46
IncomeBuilder strategy – manager contribution
Contributors:• For the Quarter: Overweight Brambles, AXA Asia Pacific, Seven Group Holdings, ASX and underweight Woolworths• For the Year: overweight Brambles, Fosters Group, and not owning QBE Insurance Group and Macquarie Group.
Detractors:• For the Quarter: Overweight Coca-Cola Amatil, Aristocrat Leisure, Fosters Group and not owning CSL and QBE
Insurance Group• For the Year: Overweight Primary Health Care, Telstra, Blue Scope Steel, Aristocrat Leisure and not owning CSL
Source: MLC Investment Management
Manager Performance in Excess of the IndexIncomeBuilder Strategy
(before taking into account fees and tax)
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
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
ua
lis
ed
fo
r p
eri
od
s g
rea
ter
tha
n 1
ye
ar)
Quarter to Dec-10 1 Year to Dec-10 3 years to Dec-10 5 Years to Dec-10