Investors’ Seminar

November 2014

“How Risky Are Our

Investments?”

Disclaimer

This is not Advice. Please see Mark before considering any changes. Mark will put any recommendations in writing

The information contained in this presentation has been prepared for general use only and does not take into

account your personal investment objectives, financial situation or particular needs. Before you make any decision

about whether to invest in a financial product, you should obtain and consider the Product Disclosure Statement of

the financial product.

The information provided by HFS has been done so in good faith and has been derived from sources believed to be

accurate at the time of compilation. Changes in circumstances, including unlawful interference and unauthorised

tampering, after the date of publication may impact on the accuracy of the information. Neither HFS d nor any

member of HFS accepts responsibility for any inaccuracy or for investment decisions or any other actions taken by

any person on the basis of the information included. Past performance is not a reliable indicator of future

performance.

Neither HFS nor any member of HFS guarantees the performance of the Funds, the repayment of capital or any

particular rate of return. The performance of any unit trust depends on the performance of its underlying investment

which can fall as well as rise and can result in both capital losses and gains. Consequently, due to market influences,

no assurance can be given that all stated objectives will be achieved.

Investors’ SeminarNovember 2014

How Risky Are Our Investments?

Past performance; Economic data

Forecasts

Ideal Cash & Term Deposit Levels

Top 10 Holdings

IOO – iShares S&P Global 100

XAO – S&P All Ords

What could go Wrong?

1. Drawdown Levels may significantly increase

2. Dividends may not provide sufficient cash-flow to the RHS

3. The Security of the RHS may cease

4. The businesses part-owned in the LHS may not produce adequate Earnings

5. A loss of the long-term focus and the patience – cannot “stay the journey”

Volatility – it’s not a risk; it’s a certainty

What Are The Risks?

Risk Capacity

Risk Attitude

Longevity Risk

Inflation Risk

Liquidity Risk

Credit Risk; Diversification Risk; Market Risk

Market Timing Risk

Past Performance

Lonsec Asset Classes - Historical Returns to

30 September 2014

Returns (%p.a.)    

Australian Equities

 % pa

 Global

Equities 

% pa

 Australian

Listed Property

% pa

 Australian

Fixed Interest

% pa

  

Cash 

% pa

 5 years 

  6.6

 11.2

 8.6

 6.7

 3.9

 10 years 

  8.2

 5.0

  1.7

 6.3

 4.9

 15 years 

  8.7

 2.0

  5.9

 6.4

 5.1

 20 years 

  9.4

 6.0

  7.5

 7.4

 5.4

Current market statistics and valuationsConsensus expectations for EPS growth and P/Es

10 October 2014

PE FY 2015 (f)

x

PE FY 2016 (f)

x

EPS Growth FY 2015 (f)

%

EPS Growth FY 2016

%

MARKET 14.0 12.9 5.4 8.6

Financials 12.8 12.2 7.2 4.8

- REITS 14.5 13.8 6.8 4.6

Industrials 16.5 14.9 9.8 10.68

Resources 12.6 11.0 -3.6 14.5

Top 50 13.8 12.8 3.7 7.2

Mid Cap 50 15.2 13.3 10.5 14.4

Small Ords 15.3 12.9 21.8 17.9

Source: Ausbil calculation based on consensus broker earnings forecasts, 10 October 2014

8

Forecast ReturnsLonsec

30 September 2014

Asset Class 10 Year Forecasts

   Yield% pa

 

 Growth

% pa

 Total% pa

 Australian Equities 

 4.5

  4.2

 8.7

 Global Equities 

 2.5

  5.8

 8.3

 Australian Listed Property 

 6.0

  2.0

 8.0

 Australian Fixed Interest 

 4.4

 0.2

 4.6

 Cash 

 4.2

 -

 4.2

10

Average annual total returns after inflation

Australian long term returns

1900-2013

%

1950-2013

%

1950s

%

1960s

%

1970s

%

1980s

%

1990s

%

2000s

%

2010-2013

%

Real bond returns 1.5 1.0 -6.3 0.9 -5.1 2.1 9.9 3.7 5.0

Real equity total

returns7.4 6.1 9.0 10.6 -4.2 8.6 9.0 5.5 4.0

Real equity capital gains less

inflation1.6 0.8 2.4 4.6 -10.6 4.0 4.6 1.4 -0.3

Income compounding effect 5.8 5.3 6.6 6.0 6.4 4.6 4.4 4.1 4.3

Source: Credit Suisse / London Business School :‘Global Investment Returns Yearbook 2014’

The Ideal Level Of Cash & Term Deposits

Segmentation Bar Placement – the key issues are:

A. Drawdown Goals – allocate considerable time to this

B. Market Issues (a) Dividends from the LHS; (b) Worst Case long-term share prices in LHS

LHS – Long-TermInvesting

10 Year Investing vs 1 Year Investing

“Rolling Smoothed” 10 Year Returns

Hayden Investment Paradox

Allowance for Inflation is crucial because we must retain our Purchasing Power

ASISP

TD

Cash

Specialist Stock-picker

XYZ Manager

We want to:

1. Buy a designated portfolio of shares

2. Contract a high-quality specialist Investment Manager to manage the portfolio and instigate changes to ensure best forecast (prognostic) returns

Specialist Stock-picker

How do we ensure a high quality result

A. Analyse the portfolio of shares

B. Analyse the skill-set of the Investment Manager

Realistic Goals

Structure/Strategy (Tax etc)

Super Fund Admin

Asset Mix 1 -Cash/TermDeposits

Asset Mix 2–Growth Section (LHS)

Stock-Picker Selection

The Boxes to Tick

What can Investors expect from HaydenFS?

A. Revision of the Segmentation Bar Placement – to ensure the ideal level of Cash & Term Deposits

B. Revision of the Investment Managers and Specialist Stock-Pickers

Peace-of-mind for Investors

1. Part-own a lot of great businesses. We have a portfolio of businesses that is well diversified across locations, industries and size.

2. Employing (contracting) some very wise people to monitor and change our portfolio of investee businesses when necessary.