F U N D S

MAN A G E M E N T S E RV I C E

QUARTERLY INVESTMENT

REPORT

31 December 2016

Produced by P U B L I C T R U S T E EGPO Box 1338 Adelaide South Australia 5001 T 08 8226 9200 | F 08 8226 9350Country freecall 1800 673 119 (landline only)www.publictrustee.sa.gov.au

Quarterly Investment Report, 31 December 2016

This Quarterly Investment Report presents the results of the Public Trustee’s Funds Management Service performance and commentary for the quarter ended 31 December 2016.

Public Trustee is a statutory entity founded in 1881. At the end of the December 2016 quarter, it had approximately $997m in funds under management. Public Trustee’s Funds Management Service has a distinguished record of high quality, proven and consistent investment performance. We are proud of our long-standing reputation for trust and reliability, and the vital role we play for our customers and their financial affairs.

December was another strong quarter for financial markets resulting in sound returns for Public Trustee customers. So far this financial year returns range from 0.97% for cash to 9.39% for equities. Over the longer term (5 years) Public Trustee’s investments also continue to perform well, with returns ranging from 3.07% for cash to 13.63% for equities.

SIS Performance versus Benchmark to 31 December 2016

Performance* Last 3 months

Last 12 months 3 years 5 years

Cash 0.46% 2.08% 2.46% 3.07%benchmark 0.19% 1.06% 1.37% 1.78%variance 0.27% 1.02% 1.09% 1.29%

         Capital Stable 0.72% 3.99% 4.44% 6.05%benchmark 0.22% 3.95% 4.11% 5.40%variance 0.50% 0.04% 0.33% 0.65%         Balanced 1.22% 5.74% 6.10% 8.90%benchmark 0.80% 5.83% 5.83% 8.29%variance 0.42% -0.09% 0.27% 0.61%         Growth 2.07% 6.81% 6.87% 10.85%benchmark 2.18% 7.16% 6.47% 10.13%variance -0.11% -0.35% 0.40% 0.72%         Equities 4.07% 8.41% 7.68% 13.63%benchmark 5.35% 9.60% 7.23% 12.91%variance -1.28% -1.19% 0.45% 0.72%

*After fees

If you would like to add to your portfolio, you may do so at any time. Please contact Suzanne Radermacher (08) 8226 1746 for more information.

Debra ContalaPublic TrusteeFebruary 2016

Quarterly Investment Report, 31 December 2016

Market OverviewGlobalGlobal share markets continued their positive form over the December quarter, with most attention focused on the United States. In November, Republican candidate Donald Trump was elected as the new President of the United States. In December, as expected the US Federal Reserve increased interest rates. In the Eurozone, political events were also at the forefront with Italian Prime Minister, Matteo Renzi, resigning following a failed referendum to reform government.

AustraliaThe Reserve Bank of Australia kept official interest rates on hold during the quarter at 1.50%. The Australian Dollar depreciated against the US Dollar, finishing at $0.72US, whilst it appreciated against other major currencies.

Share MarketsThe Australian share market had a strong quarter, closing up 4.9%. Overseas shares, measured by the MSCI World Index, also performed well finishing the quarter up 7.7% on an unhedged basis.

Key DevelopmentsKey developments over the quarter were:

US Presidential election; Global share markets were strong; Key commodity prices were higher (Oil, iron ore)

Since 1990, funds invested through Public Trustee Common Funds have grown from $160 million to $997 million today.

Quarterly Investment Report, 31 December 2016

Cash Investment StrategyThe Reserve Bank kept interest rates on hold during the quarter at 1.50%. The fund’s return of 0.46% for the quarter was above the benchmark return by 0.27%. The strategies 3 and 5 year returns remain at 2.46% and 3.07%, which are 1.09% and 1.29% respectively ahead of benchmark.

Crediting Rate:The investment return for this fund is calculated daily, based on the net earnings of the fund.

The average crediting rate for the quarter was 1.87%, and the daily rate at 31 December 2016 was 1.80%.

Fund size: $357 million.

Objective:Funds assigned to the cash investment strategy are invested in the Public Trustee's Cash Common Fund. The objective of the Cash Common Fund is the preservation of capital. The strategy is intended for investors who are seeking secure returns at prevailing short term interest rates.

Capital Stable Investment StrategyThe strategy’s return for the quarter was 0.72% outperforming the benchmark return by 0.50%. The strategy’s 3 year and 5 year returns of 4.44% and 6.05% are 0.33% and 0.65% respectively ahead of benchmark.

Fund size: $119 million.

Performance Quarter % 1 year % 3 year %* 5 year%**Return (after fees) 0.72% 3.99% 4.44% 6.05%Benchmark** 0.22% 3.95% 4.11% 5.40%Difference 0.50% 0.04% 0.33% 0.65%

*Annualised ** Index return on Strategic Asset Allocation

Objective:The objective of this strategy is to achieve a higher return than cash by strategically allocating 28% of the funds in growth assets and the balance in fixed interest and cash. It is suitable for investors who are seeking higher returns than cash over time and are prepared to accept a slight increase in risk in terms of downward movements in the value of their capital from time to time.

Quarterly Investment Report, 31 December 2016

Balanced Investment StrategyThe strategy’s return for the quarter was 1.22% outperforming the benchmark return by 0.42%. The strategy’s 3 year and 5 year returns of 6.10% and 8.90% are 0.27% and 0.61% respectively ahead of benchmark.

Fund size: $230 million.

Performance Quarter % 1 year % 3 year %* 5 year%**

Return (after fees) 1.22% 5.74% 6.10% 8.90%

Benchmark** 0.80% 5.83% 5.83% 8.29%

Difference 0.42% -0.09% 0.27% 0.61%*Annualised ** Index return on Strategic Asset Allocation

Objective:The objective of this strategy is to gain a higher return by strategically allocating 55% of the funds in growth assets and the balance in fixed interest and cash. It is suitable for medium term investors who seek higher returns and are prepared to accept some volatility in the value of the funds invested.

Growth Investment Strategy

The strategy’s return for the quarter was 2.07%. This underperformed the benchmark by 0.11%. The strategy’s 3 year and 5 year returns remain at 6.87% and 10.85%, which are 0.40% and 0.72% ahead of benchmark.

Fund size: $214 million.

Performance Quarter % 1 year % 3 year %* 5 year%**

Return (after fees) 2.07% 6.81% 6.87% 10.85%

Benchmark** 2.18% 7.16% 6.47% 10.13%

Difference -0.11% -0.35% 0.40% 0.72%*Annualised ** Index return on Strategic Asset Allocation

Objective:The objective of this strategy is to attain high long term returns in excess of inflation. It

Quarterly Investment Report, 31 December 2016

has a 73% strategic allocation to growth assets and the balance in fixed interest and cash. It is suitable for long term investors who are prepared to accept high volatility in the value of the funds invested.

Equities Investment Strategy

The strategy’s return for the quarter was 4.07%, which underperformed the benchmark by 1.28%. The strategy’s 3 year and 5 year returns remain at 7.68% and 13.63%, which are 0.45% and 0.72% respectively ahead of benchmark.

Fund size: $77 million.

Performance Quarter % 1 year % 3 year %* 5 year%**Return (after fees) 4.07% 8.41% 7.68% 13.63%Benchmark** 5.35% 9.60% 7.23% 12.91%Difference -1.28% -1.19% 0.45% 0.72%

*Annualised ** Index return on Strategic Asset Allocation

Objective:The equities strategy offers 100% exposure to the world’s share markets. Over the long term, it offers the prospects of high returns but with the likelihood that capital values will fluctuate broadly in line with the fortunes of the share markets. Typically, this strategy may be used as a return booster in conjunction with one of the other investment strategies.

The objective of this strategy is to gain exposure to both domestic and overseas share markets. It has a 55/45 strategic allocation to the two markets respectively.

NB: All the above investment strategies are exercised through investment in one, or a combination of, the Public Trustee Common Funds.

The investment returns presented in this quarterly report relate to past performances and must not be taken to imply that this predicts future returns of the funds. The information and opinions contained in this report have been compiled or are arrived at by Public Trustee from sources believe to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness or correctness.

The information in this report is of a general nature. Public Trustee strongly recommends that you contact the Office to discuss your particular circumstances. Public Trustee does not accept any liability whatsoever for any direct or consequential loss arising from any usage of information herein contained.

Quarterly Investment Report, 31 December 2016

P U B L I C T R U S T E EGPO Box 1338 Adelaide South Australia 5001 T 08 8226 9200 | F 08 8226 9350Country freecall 1800 673 119 | www. publictrustee.sa.gov.au