Page 2 - SMA changes rationale_Best of Breed Moderate

Restructuring Infrastructure Assets

Why we are making the change

The current property / infrastructure portfolio only carried an exposure to listed infrastructure, and
not listed property, given our greater conviction in infrastructure historically. However, our outlook
for the listed property sector has improved as cash rates have peaked and the economic backdrop has
not been as negative as originally expected. Most of the larger listed property companies have low
levels of leverage and/or do not have debt due for some time, which means they have locked in low
borrowing costs. We have reduced the listed infrastructure exposure in the portfolio to enable the
inclusion of listed property exposure, at equal weighting, while maintaining the overall allocation
here.

Currency Hedging

Why we are making the change

We currently have an unhedged position when it comes to currency on our global growth asset
portfolio. Over the last few years, and more so of late, there has been significant currency movement.
We believe the Australian dollar remains undervalued versus the US dollar and some other currencies
in comparison to long term historical averages. Given the relative strength of the Australian economy
and the likelihood foreign central banks will cut their cash rates before the RBA, there is likely to be
upward pressure on the Australian dollar moving forward. We felt it was prudent to include some
currency hedged exposure in the portfolio via global listed property and infrastructure, thus leaving
global equities unhedged for now.

Changes to Underlying Investments

Why we are making the change

We have reviewed the underlying holdings to ensure the portfolio continued to contain our highest
conviction picks and their associated blending (portfolio construction) remained appropriate
considering our expectations of the forward period. This review resulted in the following changes to
the investment lineup:
Bennelong Twenty20 Australian Equities – Sold – our conviction has softened a little here given
interactions with the manager over the last 12 months or so, with less transparency / openness than
others in the peer group making it more difficult for us to maintain and/or increase conviction.
Solaris Core Australian Equity (Performance Alignment) – Sold – our conviction has softened here
over the last 1-2 years where we felt the manager’s stock conviction had softened whilst our
conviction in other managers rose strongly.
Warakirri Concentrated Australian Share – Bought – our conviction here has increased to levels
warranting portfolio inclusion. We like the best ideas approach and the long tenure of the team and
process. We also like the quality style bias and the multiple portfolio manager approach, with a highly
experienced team encouraging accountability and constructive debate.