Page 4 - Private Wealth Specialist Income Moderate

Portfolio Update
Portfolio returns for the June quarter were a little weak, as investors took a breather following the very strong December and March quarters.
However, returns over the twelve-month period remain very strong.

Markets struggled to digest the lack of movement on interest rate relief with inflation remaining stubborn, whilst economic weakness became a little
more apparent and easier to see, creating some concern that central banks might not be able to provide the relief to curb any continued weakness. In
addition, markets seemed to struggle to cope with the large number of political events and geopolitical news been thrown at them in a short period of
time.

Highlights in the period continued to be rather narrowly focused, and in some cases fleeting. US technology stocks performed strongly yet again, with
the A.I. thematic firmly in charge. Asian and emerging market equities also performed strongly, somewhat surprisingly led by Chinese equities, though
the rally here was also narrowly led and fell away again at the back end of the quarter. Other highlights were more simple, with floating rate corporate
debt performing well on strong investor flows whilst cash also held up well given the backdrop of higher cash rates.

Weakness in the market was most evident in mid and small sized companies both locally and offshore given concerns regarding more evident
economic weakness and lack of rate relief, whilst interest rate sensitive asset classes such as property and infrastructure came under pressure as
bond yields rose. There was also some weakness in European equity markets due to the first-round election results in France, whilst Japanese and
Latin American equity markets also saw falls.

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

Top 3:

Westpac Banking Group

Suncorp Group

iShares Global 100 ETF

Bottom 3:

Dexus

Viva Energy Group

GPT Group

Portfolio changes during the quarter:
There were no changes to positioning and only one change to the investment lineup in the quarter, though we did exhaust plenty of time picking
through each investment in the portfolio, particularly those with the widest performance outcomes. The key takeouts from that analysis and inquiry,
and pleasingly so, is that the portfolios remained well positioned with an all-important focus on the longer-term and investment selection remains
aligned to key portfolio outcomes. We are seeing and finding more and more opportunities which aren’t being reflected in short-term pricing.

During the period, Suncorp Capital Notes 2 (SUNPG) reached their first call date and was redeemed by Suncorp. Each unit was redeemed for a par
value ($100), along with a final distribution. We replaced SUNPG with the VanEck Australian Subordinated Debt ETF (SUBD), given considerations for
relative valuations, liquidity, and risk. SUBD is an ETF which invests in a portfolio of subordinated bonds, providing investors with exposure to a
portfolio of regulatory Tier 2 Capital investment grade credit subordinated floating rate bonds, similar to hybrid securities but higher ranking in the
issuer’s capital structure.

Market Outlook
Our outlook isn’t overly changed but remains somewhat different from consensus (ie. the broader market), which presents both risk and opportunity.
We continue to think the market is underestimating the likely characteristics of a “soft-landing”, where we expect weaker economic conditions ahead
but aren’t necessarily in the recession camp. We also think the equity market is too narrowly focused on a small number of winners, increasingly only
benefiting anything A.I. related whilst treating this thematic as somewhat immune from the economic backdrop. History shows that nothing is immune
to the economic backdrop, unless we’re now playing with monopoly money.

This goes somewhat to explaining our more cautious tone and stance in portfolios. We still want to be participating in markets, but we’re very
conscious of the risks surrounding inflated expectations and overcrowded trades. A broadening of market winners would be a welcome reprieve, a
boon for truly active managers, given our preference for fundamentally focused/grounded long-term investment approaches.