Periodic Bulletin of DMP Asset Management Ltd March 2017

Issue 17

DMP Asset Management Ltd ABN 77 145 590 316 Australian Financial Services Licence Number 383580 Level 30, 80 Collins Street, Melbourne VIC 3000 T (03) 9981 3300 F (03) 9981 3399 W www.dmpam.com.au

Geo-political events have been in the spotlight over the last 12 months, most notably with the UK voting for “Brexit” and the election of Mr Trump in the recent US elections. Both these events sent shock waves across the world, but, perhaps surprisingly, the financial markets shrugged these events off quite quickly. Brexit saw markets down for a few days, and Trump, only for a few hours. It is a very interesting phenomenon that despite the considerable concern about the political, social and economic impact of these events, by and large, global markets have not been volatile over this period, and perhaps even more surprising that some bourses, including in the US, are reaching all-time record highs. This demonstrates a very positive forward looking view of the earning prospects for companies. This trend has also been echoed in Australia, although we are not at all time highs. The chart below shows the price movement of the S&P/ASX 200 over the last three years.

S&P ASX 200 Index

Source: FactSet

As can be observed, the last year has been positive for equity markets. At DMP Asset Management (DMPAM) we have observed that there is a heightened level of concern among many investors about what is the likely direction of the market looking forward given the backdrop outlined. Markets are notoriously difficult to predict over short term time frames, but over a longer time horizon, it is possible to be more confident of the likely returns from markets. Historically, the Australian equity markets have averaged a return of approximately 9% p.a. Our view is that returns are likely to be a little lower than that over the short term, due to in part, that the domestic market seems, on average, is fairly valued. Over the year we would expect a return of 5% to 6%, before franking credits (caveat the above note – markets are notoriously hard to predict!!). We don’t believe however that this return will be delivered in a straight line, with global politics, global monetary policy and investor psychology all

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Periodic Bulletin of DMP Asset Management Ltd March 2017 likely to make an impact. We believe that the forthcoming environment is one that we will need to be more active in, being firm in selling stocks when they reach our target valuations and taking opportunities when they present themselves. While we are predicting a slightly lower return than average, 5% to 6% still represents a meaningful premium to the returns available in the risk free asset class, cash (1.5%) or from bonds (with the 10 year bond currently yielding approximately 2.5%). Therefore, for those investors with a tolerance for risk, and no immediate requirement for capital draw downs, remaining invested in domestic equities is a suitable strategy. However, for current equity investors who have heightened sensitivity to risk, or requirements for capital, equity investors may not be an optimal strategy for you at this time. In response to the unique set of market conditions facing investors at this time, DMPAM introduced some additional strategies to our suite of offerings to our clients. These are products which are designed to provide a relatively high level of yield

delivered with a low level of risk. We have called these strategies the Conservative Income strategy and the Income Plus strategy. We have included flyers on each of these strategies for your reference. These more conservative investments are attracting a lot of interest, often from investors who have cash at bank, or are rolling term deposits and are frustrated with the low level of income offered in these markets. We are also observing interest from equity investors who are choosing to de-risk. Should you wish to explore you investment exposures and, or, either of our income strategies, we would be more than happy to discuss this with you. To arrange a time, please do not hesitate to contact Fiona Hilbert on 03 9981 3300 or Fiona.Hilbert@dmpam.com.au

Allison Hill Chief Executive Officer

Disclaimer The information, opinions, estimates, conclusions, material and other data (the “Information”) presented in this document are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities. Nothing in this document constitutes legal or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. The Information presented in this document has been obtained or derived from sources believed by DMP Asset Management Ltd (DMPAM) to be reliable, but DMPAM makes no representation or warranty, express or implied, as to their accuracy or completeness. To the extent permissible by law, DMPAM, its employees, agents and advisers exclude all liability for any loss or damage arising directly or indirectly as a result of any person acting or relying on the Information presented in this document. Any projections contained in this document are estimates only and may not be realised in the future. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. This document was prepared for multiple distribution and contains general securities advice only. It does not take into account the specific investment objectives, financial situation or needs of individual recipients and may not be appropriate in all circumstances. Persons relying on this Information should do so taking into consideration their specific investment objectives, financial situations and needs. Before acting on the basis of this document you are advised to contact DMPAM or an independent adviser for individual advice tailored to your personal circumstances. Finally, in accordance with the Corporations Act 2001 (Cth) please note that: (a) DMPAM may receive fees and commissions concerning any or all of the entities which are the subject of this document. Details of those fees and commissions are available on request; and (b) DMPAM and/or its employees may hold securities or rights to take up securities or may intend to acquire securities in any or all of the entities which are the subject of this document.