Document Sample
                                       Effective Date - 04 JULY 2009

1.       Investment Objectives

             To provide for the retirement of its members who are age 45 and 49 and
             have no planned retirement date within the next 10 years.
             To maintain the real value of the investments at 5% above the inflation rate
             after allowing for costs and taxes.
2.       Guiding Principles

             The fund will not invest in any illegal activities or immoral companies or
             A position will never be taken where the fund is at risk of being unable to
             fulfil its obligations of that position.
             The fund will operate within the guidelines defined by the Australian Tax
             The investment strategies will be reviewed at least once per year or when
             our market outlook changes.
3.       Asset Allocation

             The following are the asset classes that the fund will invest in, and ranges
             have been outlined for each asset class to allow the fund to move assets
             from one class to another as necessary:
               Asset Class                                      Maximum % of        Typical
                                                                Funds Invested     Holding %
               Cash                                                     100               30
               Fixed Interest                                            50                 0
               Shares and Options                                        90               40
               (Listed, Unlisted, International & Australian)
               Managed Funds                                            50                   20
               (Exchange Traded Funds, Mutual Funds)
               Alternative Assets                                       50                   10
               (Hard and soft commodities)

             The fund will not invest in property as the members already have significant
             exposure to property investments outside of the fund.
             Exposure to alternative assets may be effected via investment in exchange
             traded commodities.
             Cash will be held in sufficient amount to meet tax and administration
             expenses and to allow for investment opportunities.

4.       Investment methods the fund will use to generate returns

             Asset prices do not always go up so a buy and hold strategy will not be
             able to generate the desired returns in a down or flat market. Hence, the

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             fund will actively manage its assets and use Exchange Traded Options to
             increase returns.
             Investment methods used must take advantage of a market travelling in
             any of its possible directions (up [bull], down [bear] and sideways [neutral])
             Investment methods to be used include:
                  o    Bull Market
                                Buy and hold assets for capital growth
                                Sell put options to enter a long asset position at a discount
                  o    Bear Market
                                Sell call options on assets (i.e. covered calls) to generate
                                additional income
                                Buy put options to take advantage of a falling market
                  o    Neutral Market
                                Sell put options to either enter a long stock position at a
                                desired price (if option gets assigned) or generate additional
                                income (if option expires worthless)
                                Sell call options on assets (i.e. covered calls) to generate
                                additional income
                                Sell option credit spreads (bear calls or bull puts) to generate
5.       Investment methods the fund will use to manage risk

             The fund will diversify investments across different asset classes shown in the
             asset allocation table in Point 3. Typical holdings reflect a growth oriented
             portfolio but the fund may be rebalanced as required to reflect our market
             All exchange-traded investments will employ at least one of the following
             risk management strategies:
                  o    Assets with Options
                                Buy put options to protect the underlying asset when
                                asset/sector/market show a potential change in direction
                                (e.g. company earnings report/ bad news in a particular
                                sector/bad economic news)
                  o    Assets without Options
                                Buy put options in an index that most closely relate to asset
                                Set a stop loss and sell asset if it falls below this value

DATED             4 July 2009

____________________________________                   ______________________________________
Christina Bong                                         Kingsley McDonald

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Minutes of a meeting of the Trustees of the SLI Superannuation Fund

Meeting:               SLI Superannuation Fund Investment Strategy Annual Review

Attendees:             Christina Bong (CB), Kingsley McDonald (KM)

Date & Time:           4 July 2009 @ 10:15 AM


     1.      Assessment of market conditions
     2.      Directional Opinion
     3.      Agreement of Strategy
     4.      Other Items
     5.      Close

1.    Assessment of Market Conditions
      The Global Financial Crisis kicked off with the decline of the US stock market
      November 2007 and spread throughout the other world markets as a result of the
      cross boundary trade and borrowing agreements that exist. The collapse of the
      sub-prime mortgage market, where institution over leveraged themselves to
      make as much money as they could saw a crippling of the financial sector. As a
      result a massive flow on effect swept the world with the destabilisation of the US
      financial markets.

      This destabilisation, which saw massive bailouts by the US government to avoid
      financial instability across the country, lead to the massive US debt funded by
      the selling of bonds (predominantly to China). As the US economy struggled,
      consumers tightened their spending, putting local businesses at risk, impacting
      employment as well a significantly reducing imports which was helping to drive
      the China economy. As the Chinese economy slowed, declining requests from
      China for Australian ore exports, which had helped to drive the Australian
      economy significantly through the bull period from Mar 2003 – Jan 2008, began
      to take its toll.

      In an attempt to avoid a melt down of the Australian economy similar to that of
      the USA, the Australian Labour government attempted to maintain economic
      cash flow by providing a stimulus package and offering money to taxpayers as a
      hope that these funds cycled back into the economy via spending on goods
      and services. Although this worked (short term), this pushed the government into
      deficit. With further decline in spending across Australia and rising
      unemployment in Australia hitting 5.8% in Jun 2009 (source ABS), the near future
      outcome for the economy is still bound with uncertainty.

      Looking forward for the next year and beyond, taxes will need to rise to repay to
      deficit (and already the threshold for contributions to super have been impacted
      by being reduced by 50%), and consumers will continue to pay down their

      Cautious spending will see less retail dollars and companies making less money.
      With lower profits, dividends will be slashed and share prices cannot be
      expected to have any significant growth. The question of sustainability within
      companies with reduced cash flow will continue to put pressure on financial
      consolidation with companies leading to and expected further increase in the

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Minutes of a meeting of the Trustees of the SLI Superannuation Fund

      unemployment figures. We expect to see this stabilise over the next six (6)
      months as the economy reaches a state of equilibrium. Beyond this, mild
      growth would be expected as people are always cautious after they have been
      beaten down economically.

2.    Directional Opinion
      Although our investment instruments allow us to take advantage of a market
      moving in any direction, up, down and sideways, we have assessed where we
      believe the market will be moving as these will provide guidance the strategies
      employed by the fund to achieve its targeted investment return.

      We are not expecting a bull market in the next 1 – 2 years without significant
      change in consumer confidence. However, bear rallies may occur from time to
      time and we must be positioned to take advantage of these rallies.

      We expect the market to oscillate sideways in a range for a period of time
      (similar to 1999 to 2002), as investors test the market and will take profit when
      they believe the share price is greater that the value of the company given the
      cash flow and profits it is able to generate.

      The other possibility is that there are still unknown factors which may impacts
      significant corporate companies which could see a potential of a further leg
      down in the market. The next support level is at 2850 and a break of this support
      level could create a sense of panic in the market (note, as at 1 Jul 2009 the
      AORD is at 3947.80).

      The chart below shows the All Ordinaries movement over the past 25 years and
      the channels that it has followed.

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Minutes of a meeting of the Trustees of the SLI Superannuation Fund

3.    Strategy Agreement
       1. Given our analysis of the market, our outlook is flat to deflationary i.e. we
           expect asset prices to stay low and possibly go down further. It was agreed
           that no changes to the asset class allocation is required as it already allows us
           to hold the fund 100% in cash if there are no suitable opportunities to profit in
           the market.

      2. It was noted that under the expected market conditions, we will need to
         manage the fund more actively to generate the returns stated in our
         investment objectives. In a neutral market:

          •    The use of defined risk credit spreads to take advantage of a market in a
               trading range should be included into the pool of investment methods.

          •    Where possible, we plan to increase the returns on these assets by selling
               options on long asset positions, to generate additional income.

      3. With the quantitative easing measures taken by governments, there is also a
         risk of inflation. To manage the fund’s risk to inflation; the fund will maintain
         some investments in alternative assets which typically do well in an
         inflationary environment. These include hard commodities such as gold and
         silver and soft commodities such as oil and agricultural products.

      4. Although people see wide diversification as a way to manage risk, we do not
         agree with this as there are risks in investing in new asset classes that we are
         not familiar with. We prefer to focus on key asset classes that we understand
         accompanied by necessary risk management activities.

      5. Summary of changes and asset class breakdown:
         • Cash – Typical holding to move from 10% to 30%
         • Fixed Interest - remain unchanged
         • Shares – Typical holding to move from 50% to 40%
         • Managed Funds (ETF and Mutual Funds) – remain unchanged
         • Alternative Assets – Typical holding to move from 20% to 10%

      6. It was agreed that the strategy should be rewritten to discuss the strategies
         for the fund and the risk management techniques.

4.    Other Items
5.    Meeting Closed
      11:00 am

____________________________________            ______________________________________
Christina Bong                                  Kingsley McDonald

Dated: 4 July 2009

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