1. 1 JANA’s Quarterly Capital Markets & Asset Allocation Update – September 2014

2. 2 Market returns to 30 September 2014 2  Australian Equities fell by over 5% during September and have continued to fall in early October.  AUD lost over 6% against the USD in September.  Unhedged Global Equities were positive in September.  Despite risk averse environment, bonds delivered small negative returns. Source: JANA

3. 3 Market returns to 30 September 2014 3 Source: JANA

4. 4 Central bank intervention has pushed yields lower and risk assets higher although this has reversed in recent weeks 4 European peripheral bonds 10 year sovereign bond yields With QE ending in the US and an expectation that interest may rise, greater focus has returned to asset pricing and macro economic and political risks. Source: JANA

5. 5 The Equity bull market is now into its 6th year which in part has been driven by Fed liquidity injections 5 Source: Schroders The sell-off in September is moderate in comparison to recent price gains, but does reflect rising concerns about pricing in light of macro economic and political risks.

6. 6 Are markets expensive? Current valuations 6 Valuations based on short term measures are not excessive Source: JANA

7. 7 Are markets expensive? Longer term measures 7 US corporate profit margins at historic highs Schiller PE for S&P500 Longer term metrics raise concerns

8. 8 Volatility spiked during the month though is still at relatively low levels. It reached 65 in 2008 and 45 in 2011. Volatility Source: JANA

9. 9 US supported by positive economic fundamentals 9 US unemployment falling US housing market improving Corporate balance sheets in good shape Record levels of cash on balance sheets

10. 10 Conditions slowly improving off a very low base in the Eurozone Source: Datastream

11. 11 High unemployment persists across much of the Eurozone. The ECB is looking at further monetary stimulus to avoid deflation Source: Datastream

12. 12 3Q growth has stumbled after a pick up in the prior quarter. China

13. 13 Australian labour market still showing signs of weakness

14. 14 Commodity prices falling rapidly Falling demand for resources in China driven by a slowing property market coupled with global oversupply has pushed iron ore prices sharply lower to below $80USD per tonne. Chinese House Prices Slowing

15. 15 Australian Equities are not cheap, especially non-Banks and non-Resources Source: Morgan Stanley

16. 16 Australia has a middle of the pack valuation but low EPS growth Source: IBES, Datastream, Deutsche Bank

17. 17 JANA asset class views 17

18. 18 JANA recommendations 18 Asset ClassJANA ViewComment and Recommendation Cash Neutral (unchanged)  Notwithstanding low yields, the option value of cash looks more attractive as the price risk in major asset classes increases.  Favour cash over benchmark aware bonds for incremental defensive exposure.  Hold a small overweight relative to benchmark. Hold at current overweight position. Fixed Interest Unattractive (unchanged)  At current pricing, developed world government bonds and investment grade corporate bonds offer limited diversification of equity risk.  Hold underweight duration for nominal and inflation linked government and corporate bonds.  Neutral Australian bonds relative to overseas bonds. Hold current overweight to short duration bonds as a proxy in the absence of suitable Alternatives. Listed Property Neutral (unchanged)  There have been no major changes to underlying fundamentals.  Australian property market continues to be soft. Retail sales and house prices are moderating.  Property markets overseas are well into the recovery part of the cycle with occupancy markets improving and rents increasing.  In aggregate, we recommend a neutral stance. Hold at current neutral position.

19. 19 JANA recommendations (continued) 19 Asset ClassJANA ViewComment and Recommendation Australian Equities Unattractive (unchanged)  Maintain underweight position relative to long term benchmark.  Hold positions with quality small cap managers. Hold at current underweight position. Overseas Equities Neutral (unchanged)  Hold at not more than benchmark on the basis of a combination of asset class and foreign currency views.  Maintain current allocations to emerging markets. Hold at current neutral position. Aggregate Equities Unattractive (unchanged)  Portfolio should be held at an underweight position relative to benchmark.  Portfolios which are overweight and cannot rebalance with cash flows should trim exposure. Hold at current underweight position. Alternatives Attractive (unchanged)  Consider alternative investments including multi-strategy or cash plus strategies as part of an overall strategy of building allocations to assets with low/moderate correlation to equities.  In the absence of suitable Alternatives we recommend using short duration Fixed Interest products as a proxy. Hold at current benchmark position.