1. Investors’ Seminar October 2012

2. Investors’ Seminar October 2012 Historical Data; Recent Events Forecasts Recommended Investments The 4 steps needed

3. Hayden Asset Allocation Model

4. The 4 Step Process….1

5. FP Framework Goals – realistic cashflow needs Structure & Strategy Super & Pensions Tax & Centrelink Matters Drawdowns and/or Contributions Super Fund Admin SMSFs vs Wholesale/Retail/Industry etc

6. The 4 Step Process….2

7. The Segmentation Bar Cashflow Needs Peace of Mind Confidence to let LHS focus on the long-term Trade-off for security and for long-term returns Ability to “stay the journey”

8. The 4 Step Process….3

9. Cash/Term Deposits Government Guarantee Security – Ratings Agencies Security – Short-term Access Return of the $, not return on the $

10. Term deposit rates Term Deposit “Rate Specials” Forecast RBA Cash Rate SFE Cash Futures Source: RBA, Perennial. SFE as at 22 August 2012

11. The 4 Step Process….4

12. Investors’ Seminar October 2012 The LHS = Long-term Investing Recent Events Long-term Data and Charts Forecasts

13. How are we “starting” from here? GFC – Global Financial Crisis Sovereign Debt Crisis De-leveraging

14. The GFC • Debt – Western Consumers • Sub-Prime in US; CDOs–and inter-bank transfers • Fear replaced Greed in Markets • Banking Crisis – near collapse • Lower Consumer and Business Confidence • Negative Cycle –Profits Drop; Unemployment increases; Consumer Confidence drops etc ….then Sovereign Debt issues……………

15. The “Euro” family Euro (mil) GDP Sovereign Debt Source: Eurostats 2010 data

16. The debt inheritance 60% of GDP = “healthy government debt levels” Source: OECD Economic Outlook May 2011

17. Long term bond yields Greece Portugal Spain Italy Germany Source: Bloomberg

18. Historical Data

20. Crisis – What’s Biggest? Source: AMP Capital Investors

21. Forecasts

23. LHS – Long-Term Investing 10 Year Investing vs 1 Year Investing “Rolling Smoothed” 10 Year Returns Hayden Investment Paradox Inflation is Crucial. Purchasing Power

24. Selecting Asset Sectors & Specific Investments The 3 Characteristics of Investments: Regular Return Capital Gain Access to Capital

25. Selecting Asset Sectors & Specific Investments How important are these characteristics for the 2 distinct investment sections: Regular Capital Access to Return Gain Capital RHS 5/10 n/a 10/10 LHS 10*/10 10*/10 N/A *Best Total Return is the Goal

26. Selecting Asset Sectors & Specific Investments Investment Alternatives to Eliminate: • Blended portfolios (eg Balanced etc) – will smooth volatility (over short periods) but not maximise returns • Any investment that focuses on Regular Return or on Capital Gain • Structured Products • Cash will not win based on “rolling smoothed” returns • Investments favoured by Speculators & Traders • Non-productive Investments

29. Shares vs Property vs Infrastructure Shares – Best Businesses - Industry – Barriers to Entry - Products & Services - Consumers - Management – Board and Execs Property - Land - Improvements Infrastructure – Government Intervention

31. Investors’ Seminar October 2012 Drilling Down – Shares vs Co. vs Businesses

32. Shares/Co./Businesses Dividends + Corporate Products & Services; Capital Gains Structure Trade; Supply & Demand

33. Shares/Co./Businesses Shares – a right to future Earnings (Profits) - some people see them as a collectable like antiques, art etc….a tradable piece of paper?? Company - Shareholders appoint the Board - The Board contracts Senior Management - Big picture and Day-to-Day decisions Businesses - the ability to trade - supply and demand

34. Australian employment Source: Bloomberg, ABS

35. Australian employment Impacted by A$ Source: Bloomberg, ABS

36. Australian employment Impacted by Fiscal Policy Source: Bloomberg, ABS

37. Australian employment Impacted by Monetary Policy Source: Bloomberg, ABS

38. A closer look at Step 3 – ICVR stock filters COMPANY QUALITY Industry positioning Barriers to entry Recurring- revenue Growth rates Margins Return on Equity CCompanyQuality Free Cash Flow Dividend history Management- experience and track record Management- incentives and stake in equity Corporate Strategy Corporate- Governance Balance sheet- strength VALUATION Enterprise Value / EBITDA Market Cap. / Free Cash Flow VCompanyValuation Stock Price / Cash EPS Stock Price / Dividend PS Market Cap. / Book Value RISK RATING Key macro-economic & weather- sensitivities Key customers and suppliers Government influence Level of recurring- revenue Barriers to entry RCompanyRisk Rating Balance sheet- strength Free Cash Flow Corporate Strategy Corporate -Governance Market –Capitalisation Share liquidity Major shareholders INDUSTRY Products Supply & Demand Key Macro-economic variables Growth Rate Structure Barriers to entry Return on Capital Government intervention Sustainability I Industry Rating

39. The gulf between best and worst stocks

40. Sub-sets of Shares Smaller (and Micro) Companies: Ability to Sell; Volatility International Shares: The $A; need extra knowledge of the business environment; need specific knowledge about the corporate structure

41. Do Small Caps Outperform? Fama and French (US) 1964 Source: CRSP. Small Caps = bottom 4 deciles of stocks.

42. Deconstructing International Equities Performance International underperformance comprised two elements, market valuation + currency. The following charts deconstruct this underperformance:

43. AS TD Cash IS P Specialist Stock-picker XYZ Manager

44. Specialist Stock-picker What are we buying? A designated portfolio of shares A contract to manage the portfolio and instigate changes to ensure best forecast (prognostic) returns How do we ensure a high quality result Analyse the portfolio of shares Analyse the skill-set and the expectations of both parties

45. Specialist Stock-picker The Top 10 Holdings: Are the portfolios of shares consistent with our stated goals Industry – is it an Industry conducive to good long-term returns Management – is the Board and Senior Management able to act promptly and professionally? Can Expenditure be varied when Revenue changes?

46. What Could go Wrong?The Risks? Volatility? The Flight Path – it’s the Flight Path that kills you.. J M Keynes: “The markets can be irrational for longer than an Investor can be solvent” However – we are not forced to sell. The LHS maintains a 10 year focus. True long-term investing. We have clearly defined goals – the LHS expects and accepts volatility

47. What Could go Wrong?The Risks? Volatility – it’s not a risk; it’s a certainty Risk Capacity Risk Attitude Longevity Risk Inflation Risk Liquidity Risk Credit Risk; Diversification Risk; Market Risk Market Timing Risk

48. Developments at HaydenFS The Book - The Rational Investor The Fund – Patient Capital Fund The Websites – RI & FPF A positive for HaydenFS Investors – the long-term commitment; mutual agreement

49. The 4 Step Process….1

50. The 4 Step Process….2