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Holding Asset class Allocation (%)
Atlas Arteria Fpo Stap US Prohibited Excluding Qup Australian Equities 1.3
GPT Group Fully Paid Ordinary/Units Stapled Securities Property 1.2
Scentre Group Fully Paid Ordinary/Units Stapled Securities Property 1.2
Westpac Banking Corporation Ordinary Fully Paid Australian Equities 1.2

Quarterly manager commentary

Market Update
The June quarter was a stark reminder that markets can defy economic logic in the short term with data all but confirming looming recession locally
and globally whilst most asset classes saw reasonable to strong positive returns.

Central banks grew more hawkish as the quarter went on as inflation remained persistently high in most countries. Whilst headline inflation has
peaked and continues to fall due to easing energy & food prices and repaired supply chains, core or underlying inflation is falling at a much slower
pace and reaccelerated higher in some countries during the quarter. Demand remains more resilient than most expected given the extraordinary
amount of stimulus provided during covid still providing consumers with spending capacity whilst labour markets remain very tight with
unemployment still extremely low and wages growth remaining elevated. As such, central banks have brought back their tough talking on the fight
against inflation to ensure that the inflation trajectory continues on a downward path and does not reaccelerate higher like it has in some jurisdictions.

In contrast, leading economic indicators continued to flash red pointing to looming recessions, with Australia joining the party in the quarter as the
government bond yield curve finally inverted (ie. shorter-dated bond yields higher than longer-dated yields). Retail sales data continued to weaken.
Manufacturing production and services remained in contractionary territory and weakened further. Consumer and business confidence & sentiment
remain well below their covid peaks, whilst continuing to weaken in some countries. Bad debts are beginning to rise but off a very a low base.
Economic growth continues to contract globally with Germany and NZ entering technical recessions in the quarter, and others expected to follow over
the next 6-9 months.

Around the grounds, the US finally patched over their US debt ceiling debacle with a last minute and very odd agreement to extend the ceiling until
after the 2024 elections with no upper limit. US banking system stress seemed to stabilise during the quarter, but regional banks are not out of the
woods just yet.

China growth continued to disappoint with weak export data, elevated levels of youth unemployment, soft manufacturing data, with consumers and
domestic investors remaining overly cautious. Foreign investors grew more impatient with the China reopening efforts, wanting to see significantly
more stimulus from Chinese authorities with only minor stimulus provided in the quarter.

Europe remained under pressure from a cost-of-living perspective as energy and food costs remained high given the ongoing impacts of the Russia/
Ukraine conflict and central banks obliged on the inflation fighting front with more rate rises. China’s slow reopening also heavily impacted Europe
given demand and export/import headwinds.

Japan performed well in the quarter with the country finally having what looks to be a more sustainable inflation and economic growth outlook.

Closer to home, we saw a surprise Federal Budget surplus, higher than expected increase in award and minimum wages, and Australian residential
property prices moving higher yet again as “fear of missing out” crept back in following the RBA’s April rate pause and the misguided talk early in the
quarter that the rate hiking cycle may be done.

Geopolitical risks rose as China and the West continued with trade and economic sanctions / restrictions whilst Taiwan, semiconductors (chips), and
military exercises in the South China sea risked further escalation in tensions. The Russia / Ukraine conflict continued with still no end in sight, whilst
social unrest in France worsened with violent street protests.

US equities were the highlight in the quarter, as technology stocks performed exceptionally well with a very narrow seven stocks doing all the heavy
lifting. This came after US March quarter company reporting season was better than expected and US headline inflation fell faster than expected
providing a boost that the US central bank may be close done on the rate hiking front. In contrast, bonds struggled in the quarter as yields rose
strongly (prices fell) with investors turning their attention to a “higher for longer” mantra on rates.

Portfolio update
The Portfolio return for the June quarter was strong in an absolute sense and incredibly strong in a relative sense given the very narrow rally from a
handful of US technology names and bonds coming under pressure again as yields rose strongly (prices down).

Drivers of positive relative performance included our selection within both large and small Australian equities and our positioning and investment
selection within bonds. In contrast, drivers of negative relative performance included positioning within global equities.

On the asset allocation side, our overweight to Australia equities versus global equities detracted as the US equity market powered ahead. Our
overweight to bonds versus cash also detracted from returns as bond yields rose (prices fell) whilst cash rates continued to increase. However, our
positioning in zero interest rate duration via hybrid securities provided plenty of downside protection as bond markets fell.