mlc investment performance review updated to 31 december 2009
TRANSCRIPT
MLC investment performance review
Updated to 31 December 2009
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.
AGENDA
1. Overall results
2. The market environment
3. Drill down by asset class
Slide 3
1. Overall results
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
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
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
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
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
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
2. The market environment
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
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
3. Drill down by asset class
Australian shares
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
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
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
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
3. Drill down by asset class
Global shares
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
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
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
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
3. Drill down by asset class
Australian property
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
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
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
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
3. Drill down by asset class
Global property
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
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
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
3. Drill down by asset class
Global private equity
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
3. Drill down by asset class
Long Term Absolute Return Strategy
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
3. Drill down by asset class
Diversified Debt
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
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
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
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
3. Drill down by asset class
IncomeBuilder
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
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
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