1. October 2015 – Challenges, opportunities and misconceptions

2. Disclaimer 2 IMPORTANT NOTE: This document has been prepared by DNR Capital Pty Ltd, AFS Representative– 294844 of DNR AFSL Pty Ltd ABN 39 118 946 400, AFSL 301658. It is general information only and is not intended to be a recommendation to invest in any product or financial service mentioned above. Whilst DNR Capital has used its best endeavours to ensure the information within this document is accurate it cannot be relied upon in any way and recipients must make their own enquiries concerning the accuracy of the information within. The general information in this document has been prepared without reference to any recipients objectives, financial situation or needs. Before making any financial investment decisions we recommend recipients obtain legal and taxation advice appropriate to their particular needs. Investment in a DNR Capital individually managed account can only be made on completion of all the required documentation.

3. Markets under pressure  Australian economy remains weak.  Chinese economy remains weak – although significant stimulus is being undertaken.  US economy too strong – rates to lift.  But market factoring in significant bad news. 3

4. Challenges - Australia 4

5.  Two of Australia’s key strengths breaking down  Resources – 61% of world’s Zircon, 30% of world’s iron ore, 25% of Nickle, 15% of Copper.  Barriers to entry.  But new strengths emerging  Highly education workforce (57% of workforce has a post secondary education compared with 39% in the US) – strong service sector.  Wealthy – ranked 5 th in GDP per capita and 4 th largest superannuation pool.  Education, agriculture and tourism can re-emerge with low A$.  Free Trade Agreement to be helpful.  Can Turnbull lift confidence? 5

6. Challenges - China  China has been weak for some time  Confidence undermined by authorities steps to reign in the stock market  Currency move signalled further devaluation and outflows have accelerated as a result.  Market move appears liquidity driven. 6

7. Challenges - China  China continues to run a current account surplus, has $2tn in pension assets and debt/ GDP at 60%.  And continues to stimulate – RMD 300b of equity injections, RMB60bn fund for SME’s, tax cuts, down payments for second homes cut from 30% to 20%.  Further room for monetary stimulus.  Lag before stimulus bites. 7

8. Opportunities – Growth undervalued  Uncertainty the overwhelming driver of markets.  Witness returns from bonds, utilities, property and defensive equities.  As interest rates lift, the tailwind is removed.  Look for growth to drive returns.  Key areas of growth:  Offshore earnings and exporters – TWE.  Finance – QE driven flows – MQG.  Service sectors – VED.  Infrastructure spend – LLC. 8

9. Opportunities – Improving quality  Self help can deliver growth in a difficult environment.  Cost cutting, restructuring and simplification.  Turnarounds can deliver a rating upgrade and improved earnings as market recognises the improved quality.  NAB -De-risking the business simplifies which allows greater focus and drive a re-rating.  AZJ – Cost out story and potential sell down of infrastructure assets to drive re-rating.  QBE – Cost out, de-risking the balance sheet and greater transparency to drive outcomes. 9

10. 10 Misconceptions - Lifting rates is bad for markets?  It is understandable markets are nervous on changes to interest rates.  But it is not a foregone conclusion.

11. 11 Misconceptions – Housing deliquencies  Offshore funds fearing a bad debt cycle led by housing.  But delinquencies significantly better than previous mild cycle.  And consumer savings rate is high at 10% with excess being used to pay off debt.

12. Misconception – markets expensive 12

13. Misconception – markets expensive 13  Expectations are low – 3% EPS growth.  Currency pullback supports earnings and means Aust. market investable for offshore investors.  Large sectors have led the market down – banks and resources.

14. Misconception – market expensive  Better ability to stimulate and low corporate gearing 14

15. Seek  Thesis: Sustainable Growth. 15-18% revenue growth driven by: –#1 position in China, Asia, Australia, Brazil and Mexico. Leveraging strong market position to grow out new businesses. –Access to 375m+ job seekers and assisting 400k students pa. –Strong access to data and platform to drive growth. –Reinvesting heavily which is dragging on profit growth but should drive long term growth  Valuations: Trades at a high PE of 21x yet has one of the strongest revenue growth profiles in the market. 15

16. Treasury Wines  Thesis: Improving Quality. Strong brands and improved competitive position thanks to new management and the A$.  Valuations: Good run has closed out near term upside but longer term improvements can drive higher ROE and deliver growth as they improve efficiency and lower capital intensity.  Opportunity: Market is underestimating currency benefit (no volume improvement factored in). 16

17. Fairfax  Thesis: Improving quality. –Perception is as an old media stock yet 75% of the value is Domain. –Domain has 95% of the listings of REA, 70% of the viewers yet 16% of the value. –Strong momentum with revenues up +45% in the 15. –Print revenue is only 35% of the old metro business. –Balance sheet is pristine.  Valuations: Sum of parts valuation. We assume print revenues decline by 10% pa and place it on a low multiple. Assume Domain trades at a small discount to REA despite superior growth rates. Significant upside. 17

18. Portfolio Positioning  Companies with sustainable growth especially those that are best placed to deliver top line growth via: –strong business models with structural competitive positions (Veda) –exposure to offshore markets so that profits will benefit from the lower A$ (Brambles) –exposure to growing segments of the economy (service sectors, finance and infrastructure) (Lend Lease, Macquarie Bank).  Companies with improving quality recognising that self-help and restructuring may be necessary to achieve bottom line growth in a difficult environment (QBE, AZJ).  Reduced our underweight on banks reflecting the improving value on offer in these high quality businesses.  For High Conviction portfolio we have a small overweight in the major miners reflecting the level of negativity currently reflected in the share prices. 18

19. Disclaimer 19 IMPORTANT NOTE: This document has been prepared by DNR Capital Pty Ltd, AFS Representative– 294844 of DNR AFSL Pty Ltd ABN 39 118 946 400, AFSL 301658. It is general information only and is not intended to be a recommendation to invest in any product or financial service mentioned above. Whilst DNR Capital has used its best endeavours to ensure the information within this document is accurate it cannot be relied upon in any way and recipients must make their own enquiries concerning the accuracy of the information within. The general information in this document has been prepared without reference to any recipients objectives, financial situation or needs. Before making any financial investment decisions we recommend recipients obtain legal and taxation advice appropriate to their particular needs. Investment in a DNR Capital individually managed account can only be made on completion of all the required documentation.