BUILDING BETTER FIXED INCOME PORTFOLIOS HIGH YIELD …

[Pages:12]AUSTRALIAN CORPORATE BOND COMPANY

BUILDING BETTER FIXED INCOME PORTFOLIOS

.au/models

CASH PLUS

HIGH YIELD

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2 MATURITY LADDER

CONCENTRATED HIGH YIELD

ASX fixed income portfolios, developed with a pre-defined investment strategy and mandate.

Our model portfolios offer advisers a simple way to incorporate exposure to individual corporate bonds as part of their asset allocation to fixed income. With XTBs available on ASX, advisers can access listed fixed income through any broker and hold XTBs on a range of wrap and MDA platforms. Advisers can execute XTBs through any broker or wholesale broker, giving complete flexibility.

HIGH YIELD

MATURITY LADDER

CASH PLUS

CONCENTRATED HIGH YIELD

XTB Model Portfolios

Overview

Each XTB gives you individual direct exposure to corporate bonds over leading ASX listed companies within the ASX100, such as BHP, NAB and Telstra

Advisers who use XTB model portfolios can access the range of model portfolios and receive regular updates on portfolio performance

Available portfolios

HIGH YIELD Portfolio of High Yield XTBs 8 XTBs minimum Quantitative with qualitative overlay Low turnover Benchmarked to RBA Cash Rate Daily liquidity on ASX Monthly performance reports

MATURITY LADDER Portfolio with one XTB maturing annually 5 XTBs minimum Rules based Low turnover Benchmarked to RBA Cash Rate Daily liquidity on ASX Monthly performance reports

Features and benefits

Choice ? Four model portfolios available. Choose one or a combination models to suit your client's needs

Scalability and efficiency ? Manage the fixed income component of your business efficiently and cost effectively.

Available to SMSF clients ? Designed with SMSFs in mind

Trade execution ? You have control and flexibility to implement the model portfolios by placing the trades yourself on ASX through your preferred platform, broker or wholesale broker.

CASH PLUS Portfolio of Floating Rate XTBs 3 XTBs minimum Rules based Low turnover Benchmarked to RBA Cash Rate Daily liquidity on ASX Monthly performance reports

CONCENTRATED HIGH YIELD Concentrated portfolio of High Yield XTBs Target 5 XTBs Quantitative with qualitative overlay Low turnover Benchmarked to RBA Cash Rate Daily liquidity on ASX Monthly performance reports

If XTBs are not available on your preferred platform, please contact us so we may assist in obtaining approval. We can refer you to a full service or wholesale broking service if you are looking to hold the model portfolio directly on ASX.

Contact us on 1800 995 993 or advisers@.au

AUSTRALIAN CORPORATE BOND COMPANY

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High Yield Model Portfolio

Investment objective

Within the investable universe of ASX traded XTBs, to construct a fixed income model portfolio that aims to provide:

A regular and predictable income stream

A capital preservation focus and low levels of price volatility

An absolute return that is above returns on term deposits

Liquidity, to ensure investment flexibility

Model portfolio manager

Australian Corporate Bond Company Limited (ACBC)

Investment strategy and approach

To ensure the best opportunity to meet the model portfolio's objectives, ACBC selects a portfolio of XTBs using a 2-stage quantitative process, with a qualitative overlay.

QUANTITATIVE PROCESS

STAGE 1: SELECTION Define the investment universe of securities using the following criteria:

Rank from highest yield to maturity Investment grade credit only1 Weighting parameters (issuer, security, sector2) Available liquidity

STAGE 2: APPLICATION Apply a set of rules to select an optimal XTB High Yield model portfolio.

QUALITATIVE OVERLAY

Adjustments may be made to the portfolio. These adjustments may be made to reflect market conditions, despite the rules being satisfied. The general approach is to hold securities to maturity. However, model portfolio changes may be made in response to:

An increase in the yield to maturity, by adding securities An increase in the universe of available securities Improvement to the portfolio, by switching securities

Designed for investors who:

Seek a transparent and capitalstable fixed income model portfolio that offers a regular and predictable income stream Are looking for lower risk than equities and hybrds and higher returns than 'cash-like' investments.

1 At the time of establishment.

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2 As defined by GICS Sub Industry

PERCENTAGE %

High Yield portfolio parameters

Investment universe / Authorised investments Minimum number of securities Minimum credit rating Maximum individual issuer exposure Maximum individual security weighting Maximum individual sector weighting Capital structure parameters

Benchmark Maximum maturity Liquidity Portfolio maintenance

ILLUSTRATIVE YIELD TO MATURITY

5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00

HIGH YIELD PORTFOLIO Available XTBs, fixed or floating 8 Individual bonds must be investment grade at the time of inclusion within the model portfolio 30% 25% 30%

100% exposure to senior corporate bonds 0% exposure to hybrids RBA cash rate Maximum weighted average maturity of 8 years All XTBs must have sufficient observable liquidity Reviewed monthly

ILLUSTRATIVE 12 MONTH CASH FLOWS ASSUMING A $100,000 PORTFOLIO

XTB1 XTB2 XTB3 XTB4 XTB5 XTB6 XTB7 XTB8 MODEL PORTFOLIO AUSBOND COMPOSITE RBA CASH RATE

AUD $

1,500 1,200

900 600 300

0

XTB1 XTB2 XTB3 XTB4 XTB5 XTB6 XTB7 XTB8

31 OCT 16 30 NOV 16 31 DEC 16

31 JAN 17 28 FEB 17 31 MAR 17 30 APR 17 31 MAY 17 30 JUN 17 31 JUL 17 31 AUG 17 30 SEP 17

19 NOV 19 12 MAR 20 13 MAY 20 28 OCT 20 28 FEB 21

11 JUN 21 05 NOV 21 11 MAR 22 19 MAY 22 10 JUL 22

Source: Australian Corporate Bond Company. Data as at 13 September 2016.

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