Page 3 - Best of Breed Assertive_March 2023

moved swiftly to protect deposit holders and provide a liquidity backstop to the banking system. However, the negative investor and concerned
deposit holder sentiment shifted to Europe with Credit Suisse identified as the weakest link, which culminated in a swift and quite unusual bailout by
Swiss authorities, sending reverberations through some parts of the bond market.

Interestingly, investor sentiment and expectations shifted drastically in a positive direction on the view that either central banks won’t raise rates any
further to protect the banking / financial system (a misguided view in our opinion) or won’t have to raise rates any further as the banking system
tightens financial conditions themselves thus doing the remaining heavy lifting for central banks (definitely possible). Markets were always going to rally
on a whiff of an impending pause in central bank rate hikes, but investors took it one step further by bringing forward their expectations of rate cuts.
That change in expectations, and oddly positive sentiment, saw markets rally exceptionally strongly the back end of the month with global equities and
bonds attracting all the attention, Australian equities didn’t get the memo, and property fell sharply on concerns regarding the economic outlook and
tighter financial conditions in the period ahead.

The Australian dollar fell from US71c to US66c in the quarter assisting unhedged global equity, property, and infrastructure allocations, as currency
investors moved to a risk-off stance.

Portfolio Update
Portfolio returns for the March quarter were strongly positive in the absolute sense whilst also exhibiting outperformance versus the benchmarks, in a
fairly odd quarter which saw markets rally strongly on perceived improvement in the economic outlook, then give back some of those gains on
economic data being too strong (ie. more central bank tightening required), before rallying again following foreign bank collapses (ie. central banks will
save the day). What has been apparent over the last three to five months, and pleasingly so, is markets have begun to focus back on company
fundamentals.

Drivers of outperformance for the portfolio included investment selection across growth assets (Australian equities and infrastructure) and our
preference for global assets (over local assets) with currency also assisting here. In contrast, our lower duration positioning within bonds detracted as
yields fell sharply (bond prices higher) in March following foreign banking issues with markets bringing forward their expectations of rate cuts.

On the asset allocation side, our higher weighting to global equities versus Australian equities significantly boosted returns as what worked well for the
local equity market last year (ie. dominance of financials and resources) held the asset class back this calendar year given expectations of a weaker
global economic outlook, banking concerns, and a patchy reopening for China. Our allocation to emerging market equities hurt relative returns as
more tech-heavy developed markets powered ahead. Our higher weighting to bonds versus cash also assisted returns as prices rose and yields were
sufficiently high enough over cash yields.

On the investment selection side, pleasing to see contributors from multiple sources across the portfolio as managers benefited from their strong
focus on company fundamentals as dispersion between countries, regions, sectors, and stocks continues to widen. Managers are well positioned for
the forward period with a significant number of them having triaged their portfolios in the first half of 2022 with little to show for it at the time. But
great to see managers maintaining conviction in their process whilst retaining sight of the longer term over the shorter term. The biggest contributors
from investment selection came from within Australian equities and infrastructure.

On an absolute basis, the best and worst performing investments were as follows:

Top 3:
1. AB Global Equities
2. T. Rowe Price Global Equity
3. Bell Global Emerging Companies
Bottom 3:

1. GQG Partners Global Equities
2. Resolution Capital Global Property Securities Unhedged
3. Franklin Australian Absolute Return Bond

There were no changes to the portfolio in the quarter as the Committee felt portfolios were appropriately positioned, and more specifically, that the
underlying managers had done an excellent job of portfolio adjustments and re-positioning through the course of 2022 leaving little for the
Committee to action over and above.

In saying that, the Committee remains watchful of prevailing conditions, particularly the trajectories for both inflation and interest rates, as the
economic backdrop is likely to weaken from here.

Market Outlook
Given the above, the outlook remains incredibly mixed.

China reopening is a big positive but will likely need stimulus to sustain it, with question marks surrounding the health of China’s main trading partners
(ie. the US and Europe). A stressed banking system is never good, but it might tighten financial conditions enough so that central banks don’t need to
go much higher from here on the rates front. Inflation appears to have peaked in most jurisdictions but the path lower will be key - inflation falling too
sharply risks an uncomfortable recession whilst inflation falling too slowly will force central banks to continue raising rates or to keep conditions tight
for some time. Bad debts and corporate bankruptcies are rising off a very low base but remain low for now. Labour markets remain very tight,