Spreadsheet: 195749d1353629582-when-deleting-cells-only-apply-to-current-page-template-fund-review
Sheet: G021 EOM Report

 | Bond Mandate
 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | [NAME]
 | Fund Review as at |  |  |  |  |  |  |  |  |  | 2012-06-30 00:00:00
 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Country |  |  |  |  |  |  | Portfolio (Governments) |  |  |  |  |  | Portfolio (Quasi & Supra) |  |  |  |  |  | Benchmark |  |  |  |  |  | Difference
 | Performance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Belgium
 | G021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Y
 |  |  |  |  |  |  |  |  |  | 1 month |  |  |  |  | 3 months |  |  |  |  | 6 months |  |  |  |  | 1 year |  |  |  |  | 2 years (pa) |  |  |  |  | Inception (pa) |  |  |  |  |  |  | Brazil
 | Mandate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Canada
 | Benchmark |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | China
 | Witholding tax |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Czech Republic
 | Security Excess Return |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Denmark
 | Currency Attribution* |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Finland
 | Trading Impact |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | France
 | Residual Return Difference |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Germany
 | Standard Deviation (total risk) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Hong Kong
 | Information Ratio |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Ireland
 | * Note 1: Currency attribution is due to the 2% hedge difference to the portfolio. The benchmark hedge return is calculated using start of month hedge weights. |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Italy
 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Japan
 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Luxembourg
 | Fast Facts |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Malaysia
 | Portfolio details |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Netherlands
 | [NAME] (AUD) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | New Zealand
 | Period Net Cashflow (AUD) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Norway
 | Inception Date |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Poland
 | [NAME] |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Singapore
 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | South Korea
 | [NAME] |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Spain
 | Attribute |  |  |  |  |  |  |  |  |  |  | Portfolio |  |  | Benchmark |  |  |  |  |  | Quasi Government & Supranational  (Top 6) |  |  |  |  |  |  |  |  |  |  | Portfolio |  |  | Description |  |  |  |  |  |  | South Africa
 | Yield |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Sweden
 | Duration |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Electricite De France |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Switzerland
 | Number of Securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | European Investment Bank |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | United Kingdom
 | Number of Issuers |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Caisse [NAME] |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Unites States
 | Average Credit Rating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Asian Development Bank |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Supranational
 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | KFW |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Cash + 1 Year
 | Mandate Compliance |  |  |  |  |  |  |  |  |  |  | Portfolio |  |  | Mandate Watermark |  |  |  |  |  | Landwirtsch Rentebank |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | FX P&L
 | Exposure to non benchmark securities* |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Sector [NAME] |  |  |  |  |  |  |  |  |  |  | Portfolio |  |  | Benchmark |  |  |  |  |  |  | Currency [NAME]
 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Government
 | Cash Level |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Quasi Government |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Currency |  |  |  |  |  |  | Portfolio (Governments) |  |  |  |  |  | Portfolio (Quasi & Supra) |  |  |  |  |  | Benchmark |  |  |  |  |  | Difference
 | * Note: This mandate rule is longer applicable. |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Non-Government
 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Total |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Canadian Dollar
 | Credit Quality |  |  |  |  |  |  |  |  |  |  | Portfolio |  |  | Benchmark |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | [NAME]
 | AAA |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | [NAME]
 | AA |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Euro
 | A |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Hong Kong Dollar
 | BBB |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | [NAME]
 | Sub-investment Grade |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Malaysian Ringgit
 | Cash plus Securities less than 1 year |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | New Zealand Dollar
 | FX Profit |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Norwegian Krone
 | Total |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Polish Zloty
 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Singapore Dollar
 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | South African Rand
 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Swedish Krona
 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Swiss Franc
 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | [NAME]
 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | US Dollar
 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Cash + 1 Year
 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | FX P&L
 | Valuation |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Comments
 | The following tables shows the differences between Omega and JPM in the valuation for the month. |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Market Review
 | It is broken down into:
 |  | − Capital Price: This is the price based on the face value multiply by the valuation price. |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | The last day of trading in June was the most significant for European bond markets for the calendar year.  Having managed market expectations down, European leaders exceeded market expectations with a raft of measures including:
 |  | [NAME]: This is amount of coupon allocated to the owner of the bonds in between receipt dates.
 |  | [NAME] Forwards: This is the valuation of the currency forwards. |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | ● | Centralising banking supervision by the end of  2012
 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | ● | Changing the subordination for the Spanish bailout so that other lenders to the Spanish Government rank equally with the bailout financing
 |  |  |  |  |  |  |  |  |  | Capital Price |  |  |  |  |  | Accrued Interest |  |  |  |  |  | Cash |  |  |  |  |  | FX Forward Valuation |  |  |  |  |  | Total Valuation |  |  |  |  |  |  |  |  | ● | Ensuring financial market stability by mandating the European Financial Stability Fund (EFSF) to act, possibly through secondary market
 | Omega
 | JP Morgan |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | The details about how these proposals will be implemented raises further questions (e.g. do changes to the ESM need to be ratified by individual parliaments).  Already some Governments such as Finland are flagging the need to have their parliament ratify the change.    Returns for the month in global Government bond markets were mixed with the United States 0.05%, United Kingdown -0.69%,   Germany -2.99% and Italy 2.21%.  Non benchmark countries traded well with Singapore 0.72%, South Africa 3.04% and Poland 1.49%.  Overall the JP Morgan Global Government Bond Index was down 0.11%.  The US Federal Reserve (Fed) extended its bond buying programme in June.  The so called Operation Twist enables the Fed to purchase long dated US Treasuries in exchange shorter dated US Treasuries.  [NAME] continues to reiterate the public statement that the Fed remains ready to act should the economy deteriorate further.  Therefore, the market continues to price in a chance of more quantitative easing.  Pricing in of potential further QE has ironically helped reduced US 10 year bond yields over the course of the year and reduced the need for QE.  In June however, the UST 10year remained above 1.60% for most of the month, above the current 10 year bond low of 1.45% for the year.  Economically there was little to be positive about for the quarter and this was reflected across markets with equity markets significantly negative for the quarter.  One of the few positive signs in the global economy was the apparent bottoming of the US housing market.  For the first time in seven months US average house prices increased by 1.3%, according to the Case Schiller Index.  With US consumers still deleveraging it is early days however this appears to be a signal that the US consumer is closer to finish deleveraging.   The US Federal Reserve released a study showing that the median net worth of US families fell by 39% from 2007 to 2010.  [NAME] continues to expect the deleveraging process to continue for the remainder of 2012.  The Japanese Diet passed legislation to increase their sales tax from 5% to 10%.  Whilst the bill still needs to pass through the upper house and despite major defections in the current government the bill is expected to pass in to law in the coming months.   The increase in the sales tax is a positive for Japan, bolstering it revenue to meet interest obligations.  Although, the continued mounting debt levels place a large interest servicing burden on the Japanese Government budget.  Japanese interest costs will remain about 25% of its budget expense as the debt levels continue to increase offsetting the sales tax increases.  Worryingly, Interest costs in Japan rank equally with the costs of Japans ageing population such as health care.  The Chinese economy continues to moderate with China’s May inflation data released in June showing inflation fell to 4% from 3.4% the previous month.  China’s central bank also cut interest rates for the first time since 2008, by 0.25%.  Whilst the Chinese Government will ensure that growth remains above 7% they have signalled the need to moderate growth to ensure more equal development.  Omega expects any fiscal stimulus that China enacts to be significantly less than the 2008 stimulus of approximately USD586billion.
 | Difference $
 | Difference %
 | Outlook
 | The US economy continues to be on track for small positive gains for the year, which perhaps has been over estimated by the equity market.  Europe, with its peripheral debt woes, is likely to continue to drift (at least 3 years) with the risk of a catastrophic event contained, at least in the near term.  Italy and Spain continue to come under market pressure, trading around 6% yield, which remains below the 7% and above highs of late last year.    The US presidential elections in 2012 will also provide a distraction for fiscal policy as the Republicans look to run a small Government election agenda.  The so called US Fiscal cliff continues to be a medium to concern.  If the current budget laws remain in place the contraction in spending by the Federal Government will push the US into recession in 2013. Omega expects the impact of ongoing global deleveraging to mute the impact of US monetary policy responses, with growth naturally contained by lack of consumer confidence and trust.  Europe has in the short term averted disaster with the hard work of structural reform likely to take years.  The New Zealand economy is also expected to slow down with yields rallying in line with the Australian market.  Asia and many investment grade so called emerging countries offer excellent diversification benefits out of the US and Europe.  With additional yield pickup and lower volatility the risk adjusted return expectation continues to be higher.
 | Performance Commentary
 | The Global Government Bond portfolio had a value of $694.5 million as at 30 June 2012, invested across 117 securities.  The performance for the month was -0.10%% underperforming the benchmark by 0.01%.  The underperformance was a direct result of the large rally in Italian and Spanish spreads on the last day of the quarter.  After the European leaders summit Italian and Spanish yields rallied 130 basis points.  Omega continues have a zero weight in Spanish government bonds, with a small holding of short dated Spanish Quasi government debt.  The Italian exposure continues to be the government that [NAME] manages the underweight to periphery debt through.  For example in June we purchased 0.88% of an Italian Government Bond maturing in December with a yield hedged back to AUD of 6.1%.  The purchase still keeps the portfolio underweight Italian and Spanish bonds but enables the portfolio to take advantage of mispriced bonds.  In June we also reduced the weight to Switzerland.  This was as a result of Swiss yields reaching negative levels in the short end and the yield curve not offering yield on a tax adjusted basis.  The decrease in the Swiss weight was offset through an increase in New Zealand’s as yields in New Zeeland increased on better than expected economic data.
 | Security Selection - Government
 | The Omega Optimix Global Government Bond strategy maintains underweight positions in Government debt issued by countries that rank lowly on our measure of fiscal health, the Omega Financial Health Rating™ [Rating 1 (best) - Rating 5 (worst)]:  Countries with Rating 4 and 5 where Omega are underweight or not holding;
 |  | ● | With a rating 4, the United States is underweight in our strategies.
 |  | ● | The portfolio holds no Spanish Government debt in EUR.
 |  | ● | Japan has consistently been a Rating 5 due to their high debt to GDP ratio of over 200%, and thus incurs the heaviest penalty.  The Fund has an underweight position of 25% or more to Japan Government exposure.
 |  | ● | Italy has also been a Rating 5 since inception with the portfolio remaining underweight.
 |  | ● | The Fund has no exposure to Portugal, nor has the Fund ever had any exposure to Greece.
 | Our risk controlled approach favours Governments exhibiting sound fiscal management who rank highly on our Omega Financial Health Rating™ (Ratings 1 – 3):
 |  | ● | Omega favours debt issued by Sweden, Norway and Finland (Rating 2, 2 and 3 respectively) that provide good diversification away from periphery [NAME] debt.
 |  | ● | New Zealand is Rating 2 with exposure of just above 5%.
 |  | ● | Asian economies with sound fiscal management also provide good diversification.  Malaysia and Singapore are both a Rating 2 leading to investment diversity into Asia ex Japan.
 | We believe this to be a prudent approach in defensively managing bond portfolios.