> Market Update February 2015 Michael Fazzini Multi Asset Group

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Economic and investment outlook > Okay but uneven global growth – 2013: 3.0%, 2014: 3.5%, 2015: 3.5% > Australian growth to pick up on a more sustainable basis over the year ahead > Interest rates to remain low, with the RBA cutting rates again > The $A is headed towards $US0.75, with the risk of an undershoot > Bonds and term deposits offer low returns > Cyclical bull market in shares is likely to continue, but expect more volatility > Key risks: the first Fed rate hike; problems with energy producers; Greece; China Source: AMP Capital // 3

// saw another year of solid returns Source: Thomson Reuters, AMP Capital

// 5 Global business conditions point to okay global growth, but no boom Source: Bloomberg, AMP Capital Global Manufacturing PMI average Manufacturing PMI’s

// 6 Slide in global oil prices: bad for energy producers, good for global growth, inflation Source: Bloomberg, AMP Capital

US economic growth is good Source: Thomson Reuters, AMP Capital // 7

// 8 Source: The Economist, AMP Capital

The Eurozone recovery has faltered – but the ECB is providing more support Source: Bloomberg, AMP Capital // 9

The Japanese economy should bounce back, helped by even more aggressive BoJ stimulus Source: Bloomberg, AMP Capital // 10

Chinese data is running “hot and cold”, but consistent with growth “around 7.5%”. The main risk is the property downturn Source: Thomson Reuters, AMP Capital // 11

Interest rates likely to remain low, with another RBA rate cut likely and the Fed unlikely to start tightening till mid year Source: Thomson Reuters, AMP Capital // 12

// 13 Fed monetary tightening is not always bad for shares – US shares before and after first Fed rate hikes, % Hike-6 mths-3mths+3mths+6mths+12mths+24mths* Oct Mar Nov Mar Feb Mar Jun June Average * % pa Source: Thomson Reuters, AMP Capital

// 14 Source: Thomson Financial, AMP Capital The Australian economy – mining investment slowing but there are signs of life elsewhere in the economy Mining investment looks to have peaked …which should help boost retail sales… …and then eventually non-mining investment But dwelling construction is looking up… /5059/6069/7079/8089/9099/0009/10 Non-Mining investment as % GDP Forecast /5059/6069/7079/8089/9099/0009/10 Mining investment as % GDP Forecast

Share markets are generally cheap Share market valuation indicators Source: Thomson Reuters, AMP Capital // 15

US shares are at record highs, but underpinned by record profits – much more than just quantitative easing // 16 Source: Bloomberg, AMP Capital

The challenge for investors – how to find better yield and returns as bank deposit rates stay low Source: RBA, Bloomberg, AMP Capital // 17

// 18 With interest rates & bond yields remaining very low the “search for yield” is likely to go further Source: Thomson Reuters, AMP Capital // 18

The $A is likely to fall to around $US0.75, with the risk of an undershoot Source: Bloomberg, AMP Capital // 19 The $A remains high compared to levels suggested by relative prices Short positions in the $A are building suggesting the risk of a short term bounce

Page 20 | “Bull markets are born on pessimism, grow on scepticism, mature on optimism and die of euphoria”. John Templeton

// 21 Important note While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN , AFSL ) and AMP Capital Funds Management Limited (ABN , AFSL ) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. // 21

// 22 The power of compound interest Bought for 10 cents in 1938 and sold for $3.2m in 2014…a compound return of 25.5% pa! Source: AMP Capital Investors