Model Portfolios - Morgans

As at end September 2017

Model Portfolios Morgans actively manages a series of Model Portfolios for use as guides for various investing styles across the Equities, Listed Property and Fixed Interest

Someone is sitting in the shade today because someone planted a tree a long time ago.” - Warren Buffett – Investor

classes. Investors may use these portfolios individually or within the Morgans Asset Allocation framework. The monthly performance reports detail the aims of each portfolio, track performance, portfolio metrics and rationale for monthly changes.

Portfolio performance versus benchmark

Quick guide Income Portfolio

Page 2

Balanced Portfolio

Page 3

Growth Portfolio

Page 4

Property List

Page 5

International List

Page 6

Fixed Interest Portfolio

Page 7

Cross Asset Portfolio

Page 8

Equity portfolios* 20% 14.9%

15% 8.7%8.1%

10%

9.8% 8.0%

9.2%

7.1%

5.2%

5% 0.5%0.6%0.8%

0% 0.0%

Sources: Morgans, IRESS, Factset, Bloomberg, Morningstar. Notes: All pricing as at 8/8/17. *All Equity portfolio performance figures exclude franking benefits. Figures for periods greater than one year are annualised and represent a per annum return for that period.

-5% -10% 1 Month

1 Year

3 Years

Income Portfolio

Balanced Portfolio

Growth Portfolio

ASX200 Accumulation Index

Fixed Income Portfolio


10%

10% 8%

8% 6.4%

6%

4.5%

4%

4% 2%

6%

2.7% 1.8%

1.1%

2% 2.1%

0%

0.5%

-2%

0%

-0.3% -0.6%

-4%

0.0%

-2%

-3.4%

-6%

-4%

-8% 1 Month 6 Months

1 Year

-6.1%

1 Month 6 Months

1 Year



UBS Corporate Bond Index

Blended benchmark

IMPORTANT DISCLOSURES REGARDING COMPANIES THAT ARE THE SUBJECT OF THIS REPORT AND AN EXPLANATION OF RECOMMENDATIONS CAN BE FOUND AT THE END OF THIS DOCUMENT. MORGANS FINANCIAL LIMITED (A.B.N. 49 010 669 726) AFSL 235410 A PARTICIPANT OF ASX GROUP

Income Model Portfolio as at end September 2017 Market update: The Australian market fell 0.6% in September (excluding dividends) while the AUD was shedding around 2 US cents. Broad softness across high yielders, consumer and mining stocks (all down 2-5%) has offset a solid month from the Banks (+1.2%) and Energy stocks (+2.3). The market feels like it's struggling for direction amid a news vacuum post results and we look to AGM season for confirmation of the FY18 outlook. Portfolio objective: To deliver above average income returns from stocks with defensive characteristics. The portfolio also aims to outperform the S&P/ASX 200 Accumulation Index while targeting a 6% yield after franking.

Sector weights 36% 30% 15% 11%

Financials 0%

17% 8% 10%

Industrials

Portfolio

0%

Healthcare

ASX200

7% 6% 7%

Staples

5% 5%

Telco / IT

29%

Utils/Infra

7% 0%

Discretion

Many Income stocks are still trading at elevated levels. It’s important to note that after a long period of portfolio outperformance, that rising bond yields now pose a higher threat to capital values in this Portfolio. It is prudent for investors to review their strategies in this context. Macquarie Atlas Road : We’re taking up our entitlement in the 1:6.62 Accelerated Rights issue launched to fund the recent purchase of an additional 4.9% of APRR. The market will likely still treat MQA as cum capital raising (given MEIF only sold half its stake), however FY18 distribution guidance implies a 4.6% cash yield on the $5.12 offer price, while our target price implies roughly 12% of capital upside. An easy decision to take your rights while MQA trades 6% above the offer. IPH Limited and Suncorp are on our watchlist to accumulate pending available cash. We were impressed with the robustness of IPH’s esult featuring very strong cashflow conversion and M&A discipline. We bought a new position in Suncorp early in September during post-result weakness and are happy to defend our position in a high quality business here for the medium term. Cost

Price

PE

National Australia Bank

$27.74

$32.06

12

EPS Growth 1%

Westpac Bank

$29.97

$32.83

12

4%

Commonwealth Bank

$79.30

$76.34

12

Macquarie Group

$78.82

$93.19

Wesfarmers

$38.86

Sydney Airport

10%

Yield

Weight

6.3%

12.7%

5.9%

12.5%

1%

5.8%

11.2%

14

3%

5.0%

6.2%

$41.96

16

5%

5.7%

5.8%

$3.31

$7.30

NA

NA

5.1%

5.4%

Spark Infrastructure

$2.34

$2.54

NA

NA

6.5%

5.3%

Transurban

$6.71

$12.15

NA

NA

4.7%

5.3%

Challenger Financial

$7.11

$12.47

18

9%

2.9%

5.0%

Orora

$2.20

$3.24

19

8%

3.6%

4.8%

Telstra

$3.52

$3.50

11

7%

6.3%

4.8%

AusNet Services

$1.66

$1.71

NA

NA

5.5%

4.6%

Macquarie Atlas Roads

$4.73

$5.54

NA

NA

4.3%

4.3%

APA Group

$7.23

$8.31

NA

NA

5.5%

3.7%

IPH Limited

$4.88

$5.59

16

10%

4.5%

3.5%

$13.62

$13.35

15

13%

5.8%

3.3%

$5.12

$0.00

NA

NA

NA

0.6%

Suncorp

6% 0%

climbing 0.5%, with the Bank holdings doing the heavy lifting.

Holdings

Banks

Resources

Performance and changes: The portfolio outperformed the flat market in September,

20%

30%

40%

Macquarie Atlas ENT Cash Portfolio aggregate

Cumulative value since inception $650k

14.0

4.5%

1.0%

5.4%

100%

Performance vs benchmark 18%

$600k

16%

$550k

14%

$500k

12%

16.1%

8.7% 9.2%

10%

$450k

0.0%

9.8%

9.7% 7.1%

8% $400k

6% $350k

4%

$300k

2%

$250k

0%

$200k

-2%

Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16

Portfolio

0.5% 0.0% 1 Month

-1.1%-0.9% 6 Months

Income Portfolio

ASX200 Acc.

2

1 Year

3 Years

Since Inception


Balanced Model Portfolio as at end September 2017 Market update: The Australian market fell 0.6% in September (excluding dividends) while the AUD was shedding around 2 US cents. Broad softness across high yielders, consumer and mining stocks (all down 2-5%) has offset a solid month from the Banks (+1.2%) and Energy stocks (+2.3). The market feels like it's struggling for direction amid a news vacuum post results and we look to AGM season for confirmation of the FY18 outlook. Portfolio objective: To deliver an optimum balance of income return and capital growth potential. The portfolio aims to outperform the S&P/ASX 200 Accumulation Index (XJOAI) and typically seeks to balance key attributes and exposures from the Income and Growth Equity Model Portfolios.

Sector weights 21%

Banks

30% 15%

Financials

11% 13%

Resources

17%

10%

Portfolio

9%

Healthcare

7%

ASX200

5%

Staples

7% 3%

Telco / IT

5%

7% 4%

Discretion

6% 0%

10%

Buying a new half (2.5%) position in Cleanaway. We're targeting a medium term investment here, essentially backing CWY's Berkshire Hathaway trained management to leverage compelling structural tailwinds driving increasing societal and corporate demand for sustainable waste management. We're attracted to CWY's breadth of operations, growth in its defensive revenue streams, and strong operating leverage achievable on its largely fixed cost base. CWY tends to weaken between financial results, hence we stand ready to accumulate toward a full portfolio position (c5%) should the stock weaken after its strong run post result. Topping up our position in IPH Limited. We were impressed with the robustness of IPH's result featuring very strong cashflow conversion and the discipline with which IPH is approaching growth by acquisition. The market doesn't look to be pricing in anything for IPH's growth potential, and we think that concerns about insider selling will abate.

Holdings

Cost

Price

PE

BHP Billiton

$29.32

$26.18

NA

EPS Growth NA

National Australia Bank

$28.61

$32.06

12

1%

Commonwealth Bank

$74.84

$76.34

12

Westpac Bank

$29.54

$32.83

ALS Limited

$6.27

BT Investment Mgmt

Yield

Weight

4.6%

8.2%

6.3%

7.3%

1%

5.8%

7.2%

12

4%

5.9%

6.8%

$8.45

27

19%

2.2%

6.7%

$9.81

$11.54

19

15%

4.4%

6.2%

$76.07

$93.19

14

3%

5.0%

5.6%

IPH Limited

$5.73

$5.59

16

10%

4.5%

5.3%

Oil Search

$7.89

$7.15

NA

NA

1.9%

5.3%

$70.59

$137.82

31

18%

1.5%

5.1%

$2.20

$3.24

19

8%

3.6%

5.0%

Wesfarmers

$37.23

$41.96

16

5%

5.7%

4.7%

Transurban

$6.91

$12.15

NA

NA

4.7%

4.5%

Sydney Airport

$6.37

$7.30

NA

NA

5.1%

4.0%

$70.06

$63.50

22

10%

2.3%

3.8%

Beacon

$1.71

$1.58

18

12%

3.1%

3.6%

Challenger Financial

$6.93

$12.47

18

9%

2.9%

3.6%

Telstra Cleanaway Waste Management Cash

$4.21

$3.50

11

7%

6.3%

3.3%

$1.37

$1.45

NA

NA

1.9%

2.5%

CSL Orora

Ramsay Health Care 11%

Utils/Infra

climbing 0.6%, driven by the banks, Oil Search and CSL.

Macquarie Group

17%

Industrials


20%

30%

Portfolio aggregate


17.6

8.4%

0.0%

1.3%

4.2%

100%


8.1%

8.0% 7.1%

8%

$400k

10.0%9.7%

9.2%

10%

$450k

6% $350k

4% $300k

2%

$250k

1.4% 0.6%

0% 0.0% -2%

$200k


Portfolio

1 Month

ASX200 Acc.

-0.9% 6 Months

Balanced Portfolio

3

1 Year

3 Years

Since Inception


Growth Model Portfolio as at end September 2017 Market update: The Australian market fell 0.6% in September (excluding dividends) while the AUD was shedding around 2 US cents. Broad softness across high yielders, consumer and mining stocks (all down 2-5%) has offset a solid month from the Banks (+1.2%) and Energy stocks (+2.3). The market feels like it's struggling for direction amid a news vacuum post results and we look to AGM season for confirmation of the FY18 outlook. Portfolio objective: To prioritise capital growth over income. The portfolio aims to outperform the S&P/ASX 200 Accumulation Index (XJOAI) over the economic cycle, and typically positions in an aggregate of stocks with higher economic leverage/ risk than those in Income and Balanced Portfolios.

12%

Banks

30% 19%

Financials

11% 12%

Resources

17% 14%

Industrials

10%

Portfolio

9%

Healthcare

ASX200

7% 0% 7% 3%

Telco / IT

5% 4%

Utils/Infra

7% 20%

Discretion

6% 0%

climbing 0.8%, driven by the banks, other financials and Reliance. We bought a new position in Domino's Pizza earlier this month. Post-result weakness was driven by weakness in France in 2H17, where we believe the tech/menu issues are now resolved, supporting a re-acceleration of growth in the region. We see decent value in the stock trading on 25x FY18 and offering c26% EPS growth based. Trimming profits and reducing our exposure to Reliance Worldwide. RWC has been a strong performer despite concerns around higher input prices (energy, copper), competition for US shelf space and a founder sell-down. Trading 7% ahead of our valuation (27x FY18), we're simply trimming profit and managing portfolio weight here. BT Investment Management : Topping up our holding slightly. This remains an assertive short term trade, backing the strong seasonality that BTT typically exhibits strength into Christmas supported by the Sep-Q FUM updated (due October) and full year result (November), both of which we're expecting to be robust amid an otherwise quiet market devoid of newsflow.

Holdings

Sector weights

Staples


10%

20%

30%


BHP Billiton Commonwealth Bank ALS Limited Corporate Travel CYBG Group Oil Search National Australia Bank CSL Computershare Macquarie Group BT Investment Mgmt SEEK Qube Holdings Challenger Financial Ramsay Health Care Apollo Leisure Bapcor Beacon Reliance Megaport Dominos Pizza Cash Portfolio aggregate

Cost

Price

PE

$18.37 $79.16 $6.25 $10.68 $4.73 $8.15 $30.37 $67.81 $14.44 $70.69 $10.58 $11.94 $2.67 $6.99 $54.15 $1.34 $5.26 $1.71 $3.01 $2.41 $43.72

$26.18 $76.34 $8.45 $22.88 $5.14 $7.15 $32.06 $137.82 $14.69 $93.19 $11.54 $17.51 $2.50 $12.47 $63.50 $1.48 $5.46 $1.58 $3.66 $2.20 $47.90

NA 12 27 28 11 NA 12 31 19 14 19 27 NA 18 22 13 16 18 25 NA 27

EPS Growth NA 1% 19% 12% 25% NA 1% 18% 13% 3% 15% 23% NA 9% 10% 14% 11% 12% 14% NA 22%

19.6

12.4%

$550k

14%

$500k

12%

$450k

10%

14.9%

2%

$250k

0%

$200k

-2% Portfolio

15.1%

9.7%

5.2% 3.3%

4%


7.1% 6.7% 6.3% 5.9% 5.3% 5.2% 5.1% 5.1% 4.8% 4.8% 4.7% 4.4% 4.1% 4.1% 4.0% 3.9% 3.9% 3.6% 3.2% 3.1% 3.0% 1.5% 100%

7.1%

6%

$300k

4.6% 5.8% 2.2% 1.8% 1.7% 1.9% 6.3% 1.5% 2.6% 5.0% 4.4% 2.6% 2.2% 2.9% 2.3% 3.9% 3.3% 3.1% 2.0% NA 2.6% 0.0% 3.2%

9.2%

8%

$350k

Weight


$400k

Yield

0.8% 0.0% 1 Month

ASX200 Acc.

-0.9% 6 Months

Growth Portfolio

4

1 Year

3 Years

Since Inception


Property List as at end September 2017 Morgans endorses several Property REITs suitable for portfolio diversification. The list incorporates exposures across Diversified, Industrial, Office, Specialised and Retail segments matched to suggested risk profiles.

Property : Asset Allocation view REITs have been a major beneficiary of the low interest rate environment as their yield premium over risk-free rates expanded. However ongoing outperformance looks increasingly difficult given long bond rates have begun to recover from record lows. For this reason, we apply conservative tilts to generate Property Asset Allocations ranging from 06% of total portfolios for Conservative to Aggressive risk profiles respectively.

Stock

Sector

Property : Sector view We expect property capitalisation rates to moderate which implies that NTA valuations will likely have peaked in 2017. There is still strong international demand for Australian property assets given the relative yield on offer which is likely to provide some stability despite the trending up in bond yields. As a result, direct property acquisitions remain challenging given current pricing which may lead to an increase buy-backs and further M&A activity (Investa Office Fund, Charter Hall Retail may be potential targets). Lower interest costs have been a tailwind for earnings and while a majority of interest rate costs are largely hedged, we note that interest rates are expected to increase in the near to medium term. While balance sheets remain sound with gearing levels averaging around 30% for most groups, we expect groups with higher gearing levels to look at undertaking non-core asset sales to reduce debt levels.

Description

Price

NTA

Yield

Stockland (SGP)

Diversified

Owner, manager and developer of shopping centres, logistics centres and business parks, office assets, residential communities, and retirement living villages.

$4.31

$3.82

6.3%

Lend Lease (LLC)

Diversified

Designs, funds, develops, constructs, manages, owns and/or co-invests in property and infrastructure assets.

$18.48

$6.72

3.8%

GARDA Diversified Property Fund (GDF)

Diversified

Investor in commercial and industrial properties and other assets.

$1.18

$1.11

7.8%

Centuria Industrial (CIP)

Industrial

Owner and manager of a portfolio of Australian industrial properties.

$2.53

$2.37

7.6%

Cromwell (CMW)

Industrial

Owner of a portfolio of Australian office assets + Funds manager

$0.98

$0.81

8.7%

Aventus (AVN)

Retail

Developer, enhancer, manager and lessor of large-format-retail shopping centres.

$2.31

$2.02

7.1%

Hotel Property Investments (HPI)

Retail

Owns a portfolio of freehold properties, comprising pubs and specialty stores in QLD and SA.

$3.15

$2.28

6.3%

Westfield Corp (WFD)

Retail

Developer, manager and lessor of shopping centres in the US and UK.

$7.71

$5.82

5.7%

Asia Pacific Data Centres (AJD)

Specialised

Australian data centre investment property investor and landlord.

$1.96

$1.43

5.0%

Viva Energy REIT (VVR)

Specialised

Investor and lessor of 425 service stations across Australia.

$2.14

$2.00

6.7%

Aveo Group (AOG)

Specialised

Investor, developer and manager of retirement villages.

$2.30

$3.31

4.3%

5

International List as at end September 2017 Morgans endorses several securities suitable for International diversification. The list incorporates ETFs and LICs covering several geographies, markets and themes matched to suggested risk profiles. Sources: Company data, * Notes: Fees are described either as a management expense ratio (ETFs) or as a Management fee + % of Outperformance over benchmark. MGE is a managed fund. MFF’s performance fee is an approximate % of Assets.

Why go International? International Strategy – Global Compass provides a comprehensive review of why investors need to consider more International diversification and several themes and avenues to achieve this. Over the medium term, the Australian economy will face significant headwinds that will drag on growth. The decline in a decade long mining boom is very rapidly unwinding and lacks a sustainable offset with the outlook for non-mining investment remaining weak. With fewer opportunities for growth, we believe exposure to offshore growth dynamics provides a relatively appealing source of returns. International diversification not only provides access to superior returns, but also allows investors to capture global trends, mitigate regional risk, and leverage currency movement.

Security

Type

Description

iShares Global 100 (IOO)

Global ETF

A passive proxy for global growth, aiming to track an Index of the S&P 100 largest multi-national global businesses. Global 100

Conservative 0.40%

Magellan Global Equities Fund (MGE)

Global ETF

Actively managed fund targeting optimum returns from a Global strategy. Potential returns are significantly higher but at higher cost.

MSCI World

Assertive

iShares Core S&P 500 (IVV)

US Stocks ETF

A simple, passive US market tracker with very low fees.

S&P500

Conservative 0.04%

Betashares FTSE RAFI US 1000 (QUS)

US Stocks ETF

A US market tracker with a ‘smart beta’ overlay offering 0.5-1.5% S&P500 better returns than passive indices at an equivalent level of risk.

Conservative 0.40%

ANZ Euro STOXX 50 ETF (ESTX)

Euro Stocks ETF

A passive European market tracker aiming to replicate the EURO EURO STOXX 50 Index, which provides a Blue-chip representation of STOXX 50 super-sector leaders across 12 Eurozone countries.

Assertive

0.35%

Betashares NASDAQ 100 (NDQ)

Thematic ETF

Tracks the 100 largest non-financial stocks listed on the NASDAQ, across technology, telecommunications and retail.

NASDAQ 100

Moderate

0.38%

iShares Global Healthcare (IXJ)

Thematic ETF

Tracks a diverse index of global healthcare, biotech, pharmaceutical and medical equipment companies.

S&P Global Healthcare

Moderate

0.48%

VanEck Vectors Morningstar Wide Moat ETF (MOAT)

Thematic ETF

Seeks to track a rules based, equal-weighted index which tracks attractively priced US companies with sustainable competitive advantages according to Morningstar's equity research team.

S&P500

Moderate

0.49%

BetaShares Global Sustainability Leaders ETF (ETHI)

Thematic ETF

Provide exposure to 100 large global stocks (ex-Australia) which are climate change leaders and which are not materially engaged in activities deemed inconsistent with responsible investment.

MSCI World

Conservative 0.59%

Targets long term capital growth tilted toward a more assertive style. Mirrors PM’s Global Companies delivering 3.6% p.a. outperformance over 5 years.

MSCI World

Moderate

PM Capital Global Opportunities Global (PGF) LIC

Benchmark

Future Generation Global (FGG)

Global LIC

Diversified exposure to 21 global fund managers accesses the MSCI best industry talent with significant risk diversification. 1% of NTA World is donated p.a. to Australian youth mental health charities.

Ellerston Asian Investment (EAI)

Asian LIC

Targets Asian growth equities using a high conviction scorecard strategy (macro + themes + bottom-up). Designed to complement traditional Global Funds.

6

MSCI Asia Ex Japan

Risk profile

Fees*

1.35 +10%

1.0 +15%

Conservative 0.0%*

Assertive

~0.9 +15%

Fixed Interest Model Portfolio as at end September 2017 Market update: Longer dated Australian Government bond yields remained relatively steady during September and rose just 3bp. There remains strong interest for ASX listed securities and we saw ANZ look to capitalise on this with the launch a new Capital Notes offering. Meanwhile equities ended the month flat.

Performance and changes: An expected lack of new Additional Tier 1 Capital being raised by the major banks over the year ahead has seen investors looking to position in securities with upcoming call dates. Consequently prices of existing securities have seen prices tick higher which helped the portfolio return 0.5% for the month. This was ahead of benchmark which closed flat. The portfolio remains well diversified but we will continue look for opportunities to increase exposure to securities in the debt space.

Portfolio objective: To deliver investors an attractive income return after tax, without exposing the portfolio to excessive capital price volatility. The portfolio also aims to outperform the UBS Australian Corporate Bond Index and a one-year term deposit index which will demonstrate the returns available in low-risk term deposits.

Portfolio exposure

Cash and Deposits 0%

Senior Debt 17%

$106.00

Cash Yield 7.1%

Gross Yield 7.1%

$102.85

6.3%

6.3%

5%

$100.93

$100.83

2.6%

2.6%

3%

BOQ ETB Bonds

$101.31

$100.85

2.7%

2.7%

3%

AGL Subordinated Notes

$101.30

$103.73

5.5%

5.5%

5%

AMP Subordinated Notes 2 Crown Resorts Ltd Subordinated Notes NAB Sub Notes 2

$100.00

$102.15

4.4%

4.4%

4%

$103.22

$102.98

6.7%

6.7%

5%

$100.97

$103.55

3.9%

3.9%

5%

ANZ Capital Notes

$102.50

$101.28

3.4%

4.9%

5%

ANZ Capital Notes 2

$100.00

$100.55

3.5%

5.0%

3%

ANZ Capital Notes 4

$100.00

$106.40

4.3%

6.1%

3%

CBA PERLS VI

$100.00

$102.11

3.9%

5.5%

4%

$98.94

$97.76

3.3%

4.8%

6%

IAG RES

$101.00

$104.85

4.0%

5.6%

5%

Macquarie Capital Notes

$103.29

$103.75

4.8%

5.7%

5%

NAB CPS

$101.57

$101.68

3.5%

5.0%

6%

National Bank CPS2

$100.00

$101.28

3.5%

5.1%

4%

Suncorp Group CPS2

$100.00

$101.42

4.5%

6.4%

4%

Westpac Subordinated Notes II

$100.00

$106.50

4.4%

6.3%

Holdings

Sub. Debt 29%

Cost

Price

Peet Retail Bonds

$103.12

Villa World Bonds

$102.20

AMP Bank Senior debt

CommBank PERLS VII

Pref. Shares 54%

Weight 3%

5%

Cash

18%

Performance vs benchmark

Interest rate markets

8%

5.0%

6.4%

6.9% 5.9%

6% 4.0%

4.6% 3.7%

4% 2.7%

3.0%

1.8% 1.2%

2% 0.5%

2.0%

2.4%

2.1%2.3%

2.6%

0.2%

0% 0.0%

1.0% Oct-12

-2% Oct-13

Oct-14

1y TD rate

Oct-15

Oct-16

10 Yr Govt Bonds

1 Month

6 Months


7

1 Year

2 Years

UBS Corporate Bond Index

3 Years

Rolling Term Deposits

Cross Asset Model Portfolio as at end September 2017 Market update: Longer dated Australian Government bond yields remained relatively steady during September and rose just 3bp. There remains strong interest for ASX listed securities and we saw ANZ look to capitalise on this with the launch a new Capital Notes offering. Meanwhile equities ended the month flat.

Performance and changes: Continued volatility in equity and debt markets saw the portfolio decline 0.3% during September which compares to the blended benchmark which suffered a 0.6% fall. The portfolio has significantly outperformed the benchmark over the past 12 months. We will look to add the Metrics Credit Partners Master Income Trust to the portfolio given the targeted return of RBA cash rate plus 3.25% (4.75% currently) which we view as attractive.

Portfolio objective: To deliver attractive income returns while limiting exposure to excessive capital volatility. The portfolio aims to outperform a 50/50 blend of the S&P ASX200 Index and the S&P Australian Fixed Interest Index (consisting of Govt, Supranational/Sovereign and Corporate issues). The blended index is designed to illustrate the performance of a diversified income portfolio.

$76.34

Cash Yield 5.8%

Gross Yield 8.2%

$3.88

$7.30

5.1%

5.1%

7%

Transurban

$7.41

$12.15

4.7%

5.0%

5%

Telstra Corporation

$5.06

$3.50

6.3%

9.0%

3%

$42.80

$41.96

5.7%

8.1%

4%

Centuria I REIT

$2.17

$2.54

7.7%

7.7%

4%

Viva Energy REIT

$2.51

$2.14

6.4%

6.4%

3%

3.2%

3.2%

9%

Holdings

Portfolio exposure

Cost

Price

$71.93

Sydney Airport

Commonwealth Bank

Property 7%

Wesfarmers

Sub. Debt 20%

Equity 23%

ANZ Bank TD

Pref. Shares 20%

Cash and Deposits 10% Senior Debt 20%

Weight 4%

Peet Retail Bonds

$103.12

$106.00

7.1%

7.1%

4%

Tatts Group Bonds

$104.40

$103.95

4.8%

4.8%

7%

Villa World Bonds

$100.57

$102.85

6.3%

6.3%

4%

BOQ ETB Bonds

$101.31

$100.85

2.7%

2.7%

4%

AMP Subordinated Notes 2 Crown Resorts Ltd Subordinated Notes NAB Sub Notes 2

$100.00

$102.15

4.4%

4.4%

3%

$103.22

$102.98

6.7%

6.7%

5%

$100.97

$103.55

3.9%

3.9%

5%

Westpac Subordinated Notes II

$100.10

$101.38

4.1%

4.1%

6%

ANZ Capital Notes

$102.15

$102.20

3.6%

5.2%

3%

ANZ Capital Notes 4

$100.00

$106.40

4.3%

6.1%

4%

CommBank PERLS VII

$99.16

$97.76

3.3%

4.8%

4%

CommBank PERLS VIII

$100.00

$107.27

4.6%

6.6%

3%

Macquarie Capital Notes

$100.75

$103.75

4.8%

5.7%

4%

$75.50

$85.50

6.8%

6.8%

3%

Nufarm SPS Cash

Interest rate markets

4%

Performance vs benchmark

5.0%

8% 6%

4.0%

7.2%

6.5% 4.5%

4%

3.0%

1.8%

1.1%

2%

1.6%

0% -2%

-0.3%-0.6%

2.0% -4% 1.0% Oct-12

-3.4%

-6% Oct-13

Oct-14

Oct-15

Oct-16

-6.1%

-8% 1 Month

1y TD rate

6 Months

Cross Asset Portfolio Queensland

1 Year

2 Years

3 Years

10 Yr Govt Bonds

New South Wales

Victoria 8

Blended benchmark Western Australia

Brisbane

+61 7 3334 4888

Sydney

+61 2 9043 7900

Melbourne

+61 3 9947 4111

West Perth

+61 8 6160 8700

Stockbroking, Corporate Advice, Wealth Management




Brisbane: Edward St

+61 7 3121 5677

Armidale

+61 2 6770 3300

Brighton

+61 3 9519 3555

Perth

Brisbane: Tynan Partners

+61 7 3152 0600

Ballina

+61 2 6686 4144

Camberwell

+61 3 9813 2945

Brisbane: North Quay

+61 7 3245 5466

Balmain

+61 2 8755 3333

Domain

+61 3 9066 3200

Adelaide

+61 8 8464 5000

Bundaberg

+61 7 4153 1050

Bowral

+61 2 4851 5555

Geelong

+61 3 5222 5128

Norwood

+61 8 8461 2800

Cairns

+61 7 4222 0555

Chatswood

+61 2 8116 1700

Richmond

+61 3 9916 4000

Caloundra

+61 7 5491 5422

Coffs Harbour

+61 2 6651 5700

South Yarra

+61 3 8762 1400

Gladstone

+61 7 4972 8000

Gosford

+61 2 4325 0884

Southbank

+61 3 9037 9444

Gold Coast

+61 7 5581 5777

Hurstville

+61 2 9570 5755

Traralgon

+61 3 5176 6055

Ipswich/Springfield

+61 7 3202 3995

Merimbula

+61 2 6495 2869

Warrnambool

+61 3 5559 1500

Kedron

+61 7 3350 9000

Neutral Bay

+61 2 8969 7500

Mackay

+61 7 4957 3033

Newcastle

+61 2 4926 4044

Milton

+61 7 3114 8600

Newport

+61 2 9998 4200

Australian Capital Territory

Noosa

+61 7 5449 9511

Orange

+61 2 6361 9166

Canberra

Redcliffe

+61 7 3897 3999

Port Macquarie

+61 2 6583 1735

Rockhampton

+61 7 4922 5855

Scone

+61 2 6544 3144

Northern Territory

Spring Hill

+61 7 3833 9333

Sydney: Level 7 Currency House

+61 2 8216 5111

Darwin

Sunshine Coast

+61 7 5479 2757

Sydney: Grosvenor Place

+61 2 8215 5000

Tasmania

Toowoomba

+61 7 4639 1277

Sydney: Hunter St

+61 2 9125 1788

Townsville

+61 7 4725 5787

Sydney: Reynolds Equities

+61 2 9373 4452

Wollongong

+61 2 4227 3022

Hobart

+61 8 6462 1999

South Australia

+61 2 6232 4999

+61 8 8981 9555

+61 3 6236 9000

Disclaimer The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual’s relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so. Those acting upon such information without advice do so entirely at their own risk. This report was prepared as private communication to clients of Morgans and is not intended for public circulation, publication or for use by any third party. The contents of this report may not be reproduced in whole or in part without the prior written consent of Morgans. While this report is based on information from sources which Morgans believes are reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect Morgans judgement at this date and are subject to change. Morgans is under no obligation to provide revised assessments in the event of changed circumstances. This report does not constitute an offer or invitation to purchase any securities and should not be relied upon in connection with any contract or commitment whatsoever

Disclosure of interest Morgans may from time to time hold an interest in any security referred to in this report and may, as principal or agent, sell such interests. Morgans may previously have acted as manager or co-manager of a public offering of any such securities. Morgans affiliates may provide or have provided banking services or corporate finance to the companies referred to in the report. The knowledge of affiliates concerning such services may not be reflected in this report. Morgans advises that it may earn brokerage, commissions, fees or other benefits and advantages, direct or indirect, in connection with the making of a recommendation or a dealing by a client in these securities. Some or all of Morgans Authorised Representatives may be remunerated wholly or partly by way of commission.

Regulatory disclosures Morgans Corporate Limited was a participating broker to the public offer of shares in Future Generation Global Fund in July 2015 and may receive fees in this regard. Morgans Corporate Limited was a joint lead manager to the public offer of shares in the Ellerston Asia LIC in July 2015 and may receive fees in this regard.

Recommendation structure For a full explanation of the recommendation structure, refer to our website at http://www.morgans.com.au/research_disclaimer

Research team For analyst qualifications and experience, refer to our website at http://www.morgans.com.au/research-and-markets/our-research-team

Stocks under coverage For a full list of stocks under coverage, refer to our website at http://www.morgans.com.au/research-and-markets/company-analysis/ASX100-Companies-under-coverage and http://www.morgans.com.au/research-and-markets/company-analysis/EX-100-Companies-under-coverage

Stock selection process For an overview on the stock selection process, refer to our website at http://www.morgans.com.au/research-and-markets/company-analysis

www.morgans.com.au If you no longer wish to receive Morgans publications please contact your local Morgans branch or write to GPO Box 202 Brisbane QLD 4001 and include your account details. 01.10.16

9