TAEPresented to:

Market remains very strong

2

S2011

O N D J2012

F M A M J J A S O N D J2013

F M A M J J A S

:XJO.ASX@AUX: 3:26:35

5224.5

3800

4000

4200

4400

4600

4800

5000

5200

Key Market Drivers

3

Positives

Developed world economic growth outlook improving

Domestic economy finding a bottom

Chinese economic data looking less bad.

Geopolitical risks easing

Negatives / Risks

Valuation capturing improvements in some instances

Short term risks could add some volatility

US managing the unravelling of QE

Lingering concerns regarding Chinese property market.

Developed world growth improving

4

• Global manufacturing has been improving – synchronised growth.

• US remains strong boosted by improved competitiveness for manufacturing and monetisation of gas.

• Europe recovery has been the surprise.

• Japan is seeing confidence and inflation improve.

Chinese economy bottoming

5

• Recent data has been supportive

• Issues – shadow banking, demographics, property bubble

Potential Policy Responses

De-regulate interest rates

Reduce State influence in corporates

Reduce corruption and allow foreign investment

One child policy

Industrial Production

Domestic economy improving

6

• Post election bounce in confidence?

• Housing market showing signs of recovery

• Non mining infrastructure spend to kick in next year

• Consumer balance sheet has improved thanks to housing prices, stock prices and 5 years of de-gearing.

Business Confidence

7

Inflows into equities accelerating

– Sentiment towards equities has improved

– Low cash rates driving a search for yield

8

Yields remain attractive

– Stocks still provide much better income than cash or bonds

– Earnings growth outlook improving

– And risks generally lower than they were over recent years.

9

PE adjusted for subdued earnings

– Earnings have been subdued in recent years which makes PE’s look high.

– Adjusting for the 10 year average EPS suggests the market looks cheap

– But will earnings rebound or are will they remain structurally lower?

10

PE capturing improvement in some areas

– Following a strong run in markets some segments capturing improved outlook

– PE looks expensive for defensives and small caps industrials

– Focus is on finding companies with earnings leverage which is not yet captured in market forecasts.

11

What could go wrong?

US unravelling QE

– Bond yields increasing pushing up cost of borrowing.

– What impact on housing rebound and other economic activity?

– Fiscal fade should ease as an offset European political risks

Chinese growth below expectations

Broad Portfolio Positioning

12

Offshore plays (AMC, BXB, ANN, QBE).

Rotation out of bonds into equities (HGG, MQG, QBE).

Underweight defensive companies (WOW, TLS, Utilities).

Domestic housing related stocks (LLC, SGP, DLX).

Sustainable growth stocks (TME, SEK, CWN, SHL, AZJ, AIO).

Data has been more supportive for resources (RIO, BHP).

13

Best idea for the past quarter

Southern Cross Media

– Best quality domestic media play – radio less exposed to negative structural trends

– Pick up in confidence and pick up in radio advertising driving share price

– Possible takeover target should Coalition follow through on adjusting cross media rules

– We bought when severely out of favour and are now reducing a little given the risk / reward equation no longer as strong.

S2011

O N D J2012

F M A M J J A S O N D J2013

F M A M J J A S

:SXL.ASX@AUX

1.875

0.9

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

14

Worst idea for the past quarter

Wotif

– High A$, strong competition and a loss of business in Asia has impacted WTF over the past year.

– We retain a small position (1.5%) on the basis that the yield is strong so it is paying us to wait while they increase prices (still 40% below peers), introduce packaging, expand international offering and introduce advertising.

S2011

O N D J2012

F M A M J J A S O N D J2013

F M A M J J A S

:WTF.ASX@AUX

4.5

3.3

3.6

3.9

4.2

4.5

4.8

5.1

5.4

5.7

6

15

Australian Equities High Conviction PortfolioPerformance as at 31 August 2013

Please note: Past performance is not an indication of future performance. No allowance has been made for taxation and fees are not taken into account.

1 Yr 2 Yrs 3 Yrs 4 Yrs 5 Yrs 6 Yrs 7 Yrs 8 Yrs 9 Yrs 10 Yrs% % p.a. % p.a. % p.a. % p.a. % p.a. % p.a. % p.a. % p.a. % p.a.

Dalton Nicol Reid 28.9% 17.4% 14.5% 11.2% 9.3% 5.3% 8.5% 9.8% 12.4% 13.2%Benchmark 24.3% 14.5% 10.1% 8.1% 4.6% 1.2% 4.6% 6.4% 8.9% 9.6%Outperformance 4.6% 2.9% 4.4% 3.1% 4.7% 4.1% 3.9% 3.4% 3.5% 3.6%

Tracking Error 3.7 3.8 3.5 3.5 4.1 4.6 4.6 5.0 4.9 4.9Information Ratio 1.2 0.8 1.2 0.9 1.1 0.9 0.9 0.7 0.7 0.7

Since Inception date October 2002

Blue data shows Positive Out-Performance

Benchmark: S&P /ASX 200 Accumulation Index

16

Australian Equities Socially Responsible PortfolioPerformance as at 31 August 2013

Please note: Past performance is not an indication of future performance. No allowance has been made for taxation and fees are not taken into account.

1 Yr 2 Yrs 3 Yrs 4 Yrs 5 Yrs 6 Yrs 7 Yrs% % p.a. % p.a. % p.a. % p.a. % p.a. % p.a.

Dalton Nicol Reid 27.4% 17.8% 14.7% 10.2% 8.5% 6.0% 9.2%Benchmark 24.3% 14.5% 10.1% 8.1% 4.6% 1.2% 4.6%Outperformance 3.1% 3.3% 4.6% 2.1% 3.9% 4.8% 4.6%

Tracking Error 3.8 3.8 3.7 3.7 4.2 5.3 5.1Information Ratio 0.8 0.9 1.2 0.6 0.9 0.9 0.9Benchmark: S&P /ASX 200 Accumulation Index

Blue data shows Positive Out-Performance

Since Inception date J une 2006

17

Australian Equities Income PortfolioPerformance as at 31 August 2013

Please note: Past performance is not an indication of future performance. No allowance has been made for taxation and fees are not taken into account.

1 Yr 2 Yrs 3 Yrs 4 Yr 5 Yr% % p.a. % p.a. % %

Dalton Nicol Reid 31.8% 24.8% 18.0% 12.5% 9.7%Benchmark 29.5% 24.2% 15.5% 11.8% 8.5%Outperformance 2.3% 0.6% 2.5% 0.7% 1.2%

Tracking Error 4.4 4.2 3.8 3.8 4.0Information Ratio 0.5 0.1 0.7 0.2 0.3Benchmark: S&P /ASX 200 Industial Index

Since Inception date December 2007

Blue data shows Positive Out-Performance

18

Australian Hybrid Fixed Interest PortfolioPerformance as at 31 August 2013

Please note: Past performance is not an indication of future performance. No allowance has been made for taxation and fees are not taken into account.

3 months 6 months 1 Yr 2 Yrs

% % % % p.a.

TAE Blend 1.4% 2.5% 9.3% 8.7%

Benchmark 0.4% 2.1% 5.7% 7.4%

Outperformance 1.0% 0.5% 3.6% 1.3%

Benchmark: UBS Corporate Bond Index

Blue data shows Postive Out-Performance

19

Australian Bond FundPerformance as at 31 August 2013

Please note: Past performance is not an indication of future performance. No allowance has been made for taxation and fees are not taken into account.

1 Yr 2 Yrs 3 Yrs 5 Yr 7 Yr

% % p.a. % p.a. % %

Pimco Australian Bond Fund 2.1% 6.3% 6.5% 9.1% 7.5%

Benchmark 2.3% 5.8% 6.3% 7.1% 6.9%

Outperformance -0.2% 0.4% 0.2% 2.0% 0.7%

Benchmark: UBS Composite Bond Index

Blue data shows Positive Out-Performance

20

International PortfolioPerformance as at 31 August 2013

Please note: Past performance is not an indication of future performance. No allowance has been made for taxation and fees are not taken into account.

3 Mths 6 Mths 1 Yr 2 Yrs% % % % p.a.

TAE Blend 6.7% 20.5% 38.5% 26.3%MFS Global Equity Trust 7.6% 21.0% 41.7% 28.2%Platinum International 7.8% 23.1% 43.1% 20.0%Aberdeen International Equity 4.4% 14.0% 27.1% 20.0%Magellan Global 6.3% 22.9% 38.8% 31.7%Benchmark 8.3% 22.8% 36.9% 24.0%Outperformance -1.5% -2.3% 1.5% 2.3%

Benchmark: MSCI ex AUST in $AUD

Blue data shows Positive Out-Performance

21

Disclaimer

This document has been prepared by Dalton Nicol Reid Pty Ltd, AFS Representative 294844 of DNR AFSL Pty Ltd ABN 39 118 946 400, AFSL 301658. It is general information only and is not intended to be a recommendation to invest in any product or financial service mentioned above. Whilst, Dalton Nicol Reid has used its best endeavours to ensure the information within this document is accurate it cannot be relied upon in any way and recipients must make their own enquiries concerning the accuracy of the information within. The general information in this document has been prepared without reference to your objectives, financial situation or needs. Before making any financial investment decisions we recommend you obtain legal and taxation advice appropriate to your particular needs. Investment in a Dalton Nicol Reid individually managed account can only be made on completion of all the required documentation.

Past performance is not indication of future performance. Total returns shown are based on Dalton Nicol Reid’s model portfolio and have been calculated before taking Dalton Nicol Reid’s fees into account as actual performance on managed accounts is dependant on a number of factors including, but not limited to, timing of investment, non-managed stocks and portfolio execution. No allowance has been made for taxation.