DIVERSIFICATION IN INVESTMENT & THE QUEENSLAND ECONOMY

Jim Christensen

Managing Director, Global Multi-Asset

State Investment Advisor

21 October 2016

QIC Limited ACN 130 539 123 (“QIC”) is a wholesale funds manager and its products and services are not directly available to, and this document may not be provided to any, retail clients. QIC is a company government owned corporation constituted under the Queensland Investment Corporation Act 1991 (Qld). QIC is regulated by State Government legislation pertaining to government owned corporations in addition to the Corporations Act 2001 (Cth) (“Corporations Act”). QIC does not hold an Australian financial services (“AFS”) licence and certain provisions (including the financial product disclosure provisions) of the Corporations Act do not apply to QIC. Some wholly owned subsidiaries of QIC, including QIC Private Capital Pty Ltd, QIC Investments No 1 Pty Ltd and QIC Infrastructure Management No 2 Pty Ltd, have been issued with an AFS licence and are required to comply with the Corporations Act. QIC also has wholly owned subsidiaries authorised, registered or licensed by the United Kingdom Financial Conduct Authority (“FCA”), the United States Securities and Exchange Commission (“SEC”) and the Korean Financial Services Commission. For more information about QIC, our approach, clients and regulatory framework, please refer to our website www.qic.com or contact us directly. To the extent permitted by law, QIC, its subsidiaries, associated entities, their directors, employees and representatives (the “QIC Parties”) disclaim all responsibility and liability for any loss or damage of any nature whatsoever which may be suffered by any person directly or indirectly through relying on the information contained in this document (the “Information”), whether that loss or damage is caused by any fault or negligence of the QIC Parties or otherwise. This Information does not constitute financial product advice and you should seek advice before relying on it. In preparing this Information, no QIC Party has taken into account any investor’s objectives, financial situations or needs. Investors should be aware that an investment in any financial product involves a degree of risk and no QIC Party, nor the State of Queensland guarantees the performance of any QIC fund or managed account, the repayment of capital or any particular amount of return. No investment with QIC is a deposit or other liability of any QIC Party. This Information may be based on information and research published by others. No QIC Party has confirmed, and QIC does not warrant, the accuracy or completeness of such statements. Where the Information relates to a fund or services that have not yet been launched, all Information is preliminary information only and is subject to completion and/or amendment in any manner, which may be material, without notice. It should not be relied upon by potential investors. The Information may include statements and estimates in relation to future matters, many of which will be based on subjective judgements or proprietary internal modelling. No representation is made that such statements or estimates will prove correct. The reader should be aware that such Information is predictive in character and may be affected by inaccurate assumptions and/or by known or unknown risks and uncertainties. Forecast results may differ materially from results ultimately achieved. Past performance is not a reliable indicator of future performance. This Information is being given solely for general information purposes. It does not constitute, and should not be construed as, an offer to sell, or solicitation of an offer to buy, securities or any other investment, investment management or advisory services in any jurisdiction where such offer or solicitation would be illegal. This Information does not constitute an information memorandum, prospectus, offer document or similar document in respect of securities or any other investment proposal. This Information is private and confidential and it has not been deposited with, or reviewed or authorised by any regulatory authority in, and no action has been or will be taken that would allow an offering of securities in, any jurisdiction. Neither this Information nor any presentation in connection with it will form the basis of any contract or any obligation of any kind whatsoever. No such contract or obligation will be formed until all relevant parties execute a written contract. QIC is not making any representation with respect to the eligibility of any recipients of this Information to acquire securities or any other investment under the laws of any jurisdiction. Neither this Information nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations. Copyright QIC Limited, Australia. All rights are reserved. Do not copy, disseminate or use, except in accordance with the prior written consent of QIC.

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… and has grown into a global diversified alternatives business

Global Real Estate

Established in 1991 by the Queensland Government to serve its long-term investment responsibilities

Over 90 clients including government, pension plans, sovereign wealth funds, universities and insurers. Spanning Australia, Europe, Asia, Middle East and US

Over 500 staff with offices in Brisbane, Sydney, Melbourne, London, Los Angeles, San Francisco, New York and Copenhagen

$78 billion in funds under management1

Global Infrastructure

Global Private Equity

Global Liquid

Strategies

Global Multi-Asset

Solutions

All figures as at 31 December 2015

QIC WAS BORN WITH AN INVESTOR MINDSET…

3

QUEENSLAND UNIQUE WITH FULLY FUNDED LIABILITIES

DIVERSIFICATION ENHANCED THROUGH ALTERNATIVES …

Source: QIC as at 14th October 2016

5

Managed Funds 8%

Commodities 2%

Timber 1%

Insurance-linked Securities 4%

Private Debt 4%

Infrastructure 8%

Private Equity 7%

Real Estate 9%

Equities 20%

Bonds & Cash 36%

Alternatives 44%

-10

-5

0

5

10

15

20

25

30

Australian Equities InternationalEquities (Hedged)

Australian Bonds Global Bonds(Hedged)

Australian Cash DB Real Estate DB Infrastructure DB Private Equity

Asset Class Performance, periods ended 30 June (%)

1 Year 3 Year 5 Year

Source: Northern Trust - Australian Equities, S&P/ASX200; International Equities (Hedged), MSCI ACWI ex Aus Index with Net Dividends reinvested (Hedged AUD); Australian Bonds, Bloomberg AusBond Composite; Global Bonds (Hedged), Barclays Capital Global Aggregate (Hedged AUD); Australian Cash, Bloomberg AusBond Bank Bill; DB Real Estate, QIC Global Real Estate Defined Benefit Portfolio (Gross IRR); DB Infrastructure, QIC Global Infrastructure Defined Benefit Portfolio (Gross IRR); DB Private Equity, QIC Global Private Equity Defined Benefit Portfolio (Gross IRR).

LONGER-TERM ASSET CLASS PERFORMANCE

7

… HAVE LEAD TO HIGHER RISK-ADJUSTED RETURNS

Source: QIC as at 30th June 2016

0%

2%

4%

6%

8%

10%

12%

1 year return 3 year return 5 year return

Performance

Asset Portfolio Listed Risk Equivalent Benchmark

0%

2%

4%

6%

8%

1 year vol 3 year vol 5 year vol

Risk

Asset Portfolio Listed Risk Equivalent Benchmark

0.00

0.50

1.00

1.50

2.00

2.50

1Y 3Y 5Y

Risk adjusted returns

QIC Portfolio Benchmark

QLD HAS A DIVERSIFIED INDUSTRY BASE With non-mining exports to benefit from the lower currency

* Mining share is estimated to have increased in 2015-16 via LNG exports Sources: ABS, OGS, QIC

0 6 12

ConstructionOwnership of dwellings

MiningHealth care and social assistance

ManufacturingFinancial and insurance servicesPublic administration and safety

Transport, postal and warehousingProfessional and scientific services

Retail tradeWholesale trade

Education and trainingUtilities

Rental, hiring and real estate servicesAccommodation and food services

Agriculture, forestry and fishingAdministrative and support services

IT and mediaOther services

Arts and recreation services

Queensland

Australia

Queensland - industrial structure (% of total real GDP, 2014-15)

0.0

2.0

4.0

6.0

8.0

Educationexports

Agriculture Tourism exports Mining*

Queensland - Selected export industries (% of nominal GDP, 2014-15)

Interstate

Overseas

9

QLD TOURISM TO HAVE A STRONG DECADE Via improving global growth, a lower AUD, low oil prices and capacity increases

Source: Tourism Research Australia, QIC

Source: Tourism Research Australia, QIC

-2

0

2

4

Queensland Australia

5 yrs to 2014-15 5 yrs to 2019-20 5 yrs to 2020-25

Australia - National tourists (visitor nights, average annual growth)

-2

0

2

4

6

8

Queensland Australia

5 yrs to 2014-15 5 yrs to 2019-20 5 yrs to 2020-25

Australia - International tourists (visitor nights, average annual growth)

LED BY GROWTH IN EMERGING ASIA And in particular the emerging market middle class in China

Sources: Tourism Research Australia, QIC

0 5 10 15 20

China

United States

United Kingdom

New Zealand

Other Europe

Other Asia

Japan

South Korea

Hong Kong

India

S'pore

Germany

Malaysia

France

Indonesia

Thailand

2004-05

2014-15

2024-25

Australia - International tourist spend (real terms, $B)

0.0 0.5 1.0 1.5

Brisbane

Fraser Coast

Gold Coast

Mackay

Outback

Southern Great Barrier Reef

Southern Qld Country

Sunshine Coast

Townsville

Tropical North Queensland

Whitsundays

2009–10

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16

Overseas Queensland tourism - Overseas visitors by region (millions)

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EDUCATION EXPORTS ARE RISING Via a lower dollar, regulatory changes and developing economy demand

Source: Australian Education International , QIC

0

4

8

12

16

20

2002 2004 2006 2008 2010 2012 2014 2016

China

India

South Korea

Brazil

Taiwan

Queensland - o/s student enrolments by markets (000s, yr to July)

-15

0

15

30

45

60

20

40

60

80

100

120

2002 2004 2006 2008 2010 2012 2014 2016

Annual change, % (rhs)

Level, 000s

Queensland - overseas student enrolments (calender years*)

RURAL SECTOR HAS UPSIDE POTENTIAL With demand/supply balance favourable for Qld’s largest rural export – beef

Source: ABARE, ABS, QIC

0

200

400

600

800

1000

1200

1400

1600

2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

Other United States Korea Japan China

Australia - beef exports (kilo tonnes)

100

200

300

400

500

600

700

800

1989 1994 1999 2004 2009 2014 2019 2024 2029 2034 2039

Australia - Saleyard price (A cents/kg, weighted average, FY)

Historical price

Historical trend

ABARES F'cast (Q1,16)1 Projected

long-run trend2

(2007 to 2050)

1. Based on ABARES medium term projections (2015-16 to 2020-21) for the average saleyardbeef prices in the Q1 2016 Australian Commodites Quarterly

2. Based on ABARES long-run projection for the real US$ meat price (beef, pig, sheep and poultry) to grow by 13.3% in real terms between 2007 and 2050. This translates into an average annual nominal increase in US$ terms of 2.7% (assuming annual inflation of 2.4%). Allowing for partial exchange rate pass-through (ie. a depreciation in the AUD) results in a projection for an average annual nominal increase in AUD terms of 2.9% .

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STRONG BEEF DEMAND FACTORS

Surge in population of affluent middle class in Asia will underpin strong beef demand over the next decade

2.2kt 21.3%

0.6kt 5.8%

0.8kt 7.6%

0.9kt 8.6%

China South Korea

Japan

Other Asian countries

0.3kt 3.2%

EU

2024 total forecast imports

(kt cwe) % of major imports

1.4kt 13.6%

1.1kt 10.8%

Russia

USA

0.5kt 5.1% Mexico

0.3kt 2.9%

Canada

Asia will account for 47% of

global beef imports by 2024

1.3kt 12.6%

MENA

0.2kt 1.7% Taiwan

0.2kt 2.1% Philippines

0.1kt 1.1%

Other Europe

0.4kt 3.5%

Egypt

Note: kt cwe = kilotonnes carcass weight equivalent

Source: USDA, 2015 “USDA Agricultural Projections to 2024”

Forecast results are predictions only and may be affected by inaccurate assumptions and/or by known or unknown risks and uncertainties. Forecast results may differ materially from results ultimately achieved.

QIC INVESTMENTS IN QUEENSLAND Overtop

Ov ertop

• Valued at over $17.5 billion

• Employing 35,000 people

• Infrastructure:

– Brisbane Airport

– Port of Brisbane

– Coopers Gap Windfarm (proposed)

• Real estate:

– 14 major shopping centres

– CBD office building portfolio

• Private equity:

– North Australian Pastoral Company

– Ostwald Bros.

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BRISBANE AIRPORT Australia’s third largest airport, with $1.35 billion parallel runway currently under construction

Australian Airport Passenger Comparison – CY15

Millions

25.9 23.9

16.8

8.4 6.8 5.1 4.0

13.9

8.9

5.2

4.2 0.9

0.9 0.5

39.8

32.8

22.0

12.6

7.7 6.0

4.5 2.8 2.2

Sydney Melbourne Brisbane Perth Adelaide Gold Coast Cairns Canberra Hobart

Domestic International

Millions

Passenger Volumes

4.1 4.3 4.5 4.5 4.8 5.1

14.9 15.8 16.5 16.8 17.1 16.9

19.1 20.1 21.0 21.4 21.9 22.0

FY10 FY11 FY12 FY13 FY14 FY15

International (incl DOC) Domestic

$4.2B QUEENSLAND RETAIL PORTFOLIO

• $2.5bn in annual sales

• 1,250 tenants in QIC centres

• $800m in development underway: • $525m expansion of Grand

Central in Toowoomba • $161m development at Robina

Town Centre

• ~$575m development activity planned for Queensland assets over the next two years.

Grand Central, Toowoomba, QLD

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In April, QIC acquired 80 per cent of North Australian Pastoral Company, one of Australia’s oldest and largest beef producers

NAPCO TRANSACTION

• Vertically integrated beef business

• 13 properties covering 5.8 million hectares in Queensland NT

• 0.75 per cent of the Australian landmass

• Wainui feedlot on the Darling Downs

• Herd of around 178,000 cattle.

• QIC, on behalf of clients, committed $800m to the Powering

Australia Renewables Fund ("PARF”) with AGL

• PARF will own Australia's only two operational solar farms,

totalling c.150MW, at Nyngan and Broken Hill, NSW

• PARF has committed to development of further 850MW of

renewables

• Coopers Gap Wind Farm is a priority for PARF:

– 350MW project in Qld

– progressing approvals

– final commitment expected late 2017 / 2018

• PARF will assess other large scale renewable projects

RENEWABLE ENERGY INVESTMENT

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Initial Investments - Broken Hill, NSW

Initial Investments – Nyngan, NSW

In July, QIC partnered with AGL on Australia’s largest renewable energy portfolio, including a commitment to 850MW new build

Future Investment – Coopers Gap, Qld

KEY POINTS

Queensland’s pension scheme is fully funded

Its assets are managed in a strategy to diversify away from equity risk while achieving attractive returns

Queensland’s economy is more diversified than generally perceived

Agricultural, tourism and education exports also act to buffer the State’s economy from the cyclicality of the mining sector

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