QIC The View 0809indd

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The View
A quarterly publication from QIC - September 2009

In this edition                                 QIC’s new organisational structure              QIC welcomes Robert Hines
Doug provides an update on QIC’s                QIC’s high-level functional structure           Robert joins QIC as Chief Financial
strategic review process                        and leadership team                             and Operating Officer

Message from Doug
                     In the last edition of     APRA and is taking a more hands-on              In particular, we have formally established
                     The View, I spoke about    approach to investment governance.              the QIC ‘House of Boutiques’ business
                     the drivers of the         Like many other super funds, QSuper is          model. Each boutique will now be
                     recovery and the key       also looking at in-sourcing some of the         accountable not only for their investment
                     indicators of recovery     other functions that QIC has historically       performance, but also for their own
                     that we are looking for.   provided (e.g. strategic investment services    business performance. This means that
                     Now, following one         and investment administration activities).      our clients can enjoy the specialisation,
                     of the worst financial      We are currently working very closely           responsiveness and client-alignment
                     years on record for the    with QSuper to help them achieve their          of a boutique with the backing, risk
funds management industry, it appears           objectives and I am confident that this
                                                                                                management and robust systems of a
that some of these signs of recovery, or        process will be beneficial for both QSuper
                                                                                                large investment manager.
‘green shoots’, are starting to hold foot.      and QIC. QSuper will continue to grow
Major global equity markets continue to         as a large, successful and independent
                                                                                                As part of this process, we reviewed
rally, business sentiment is improving, and     super fund and QIC will continue to be a
                                                                                                each QIC investment team in terms of
the US housing market appears to have           leading institutional investment manager
bottomed. In Australia, consumer spending       that counts QSuper as one of our largest        their ability to continue as a commercially
has remained resilient and demand for           and most valued clients.                        successful business, either by continuing to
housing continues to rebound. However,                                                          be or becoming a best-in-class investment
the scale of the collapse in demand in the      In this edition of The View, I’d like to        boutique.
last six months has meant that there is still   bring you up to date with some of the
significant spare production capacity in the     outcomes that have resulted from our            As a result, QIC is committed to and
system. I expect that we will see more job      strategic review process, including our         has invested in the ten boutiques that
losses in Australia in the coming months        new high-level organisational structure         comprise the QIC House of Boutiques
as businesses continue to feel the effects      and key appointments.                           (refer page 3 for details) and has chosen
of the downturn in economic activity.                                                           to discontinue its Implemented Solutions
                                                Refined strategy: a sharper focus                and Global Tactical Asset Allocation
Still, it does appear that the worst may be     The QIC Board recently approved a               businesses. The Australian Equities team
behind us. The global financial crisis (GFC)     direction and strategy that will see QIC        has also been restructured into two
has presented the funds management              continue as a specialist investment solutions   separate boutiques: QIC Australian Small
industry with some of the most significant       provider, but with a sharper focus. This        Companies Equities (led by Stuart Jordan)
challenges we have ever faced and the           focus will continue to be on delivering         and QIC Australian Large Companies
environment that we operate in has              client outcomes to retain and grow with         Equities (led by Paul Barnes), including
irrevocably changed. QIC’s strong focus         our clients, with a commitment to:              after-tax management capabilities.
on risk management has meant that
we have managed the challenges better           •   developing best-in-class funds
                                                                                                Through the QIC House of Boutiques, we
than most and we recently undertook a               management capabilities;
                                                                                                will continue to leverage our best-in-class
strategic review to ensure that we are
                                                •   providing best-in-class investment          internal capabilities to deliver investment
appropriately structured and resourced
                                                    solutions utilising QIC’s existing          solutions for our clients and will only
to continue to deliver on our clients’
                                                    strengths;                                  pursue implemented strategies in areas
investment objectives in the new ‘post-
GFC’ world.                                     •   creating new capabilities to ensure         where we believe we can add significant
                                                    QIC’s continued growth; and                 value for clients.
The review also addressed our changing
                                                •   growing our implementation and
relationship with QSuper. QSuper recently
                                                    advisory solutions.
became a regulated fund licenced by                                                                                     Continued on page 2

Brisbane Sydney Melbourne London                                                                                              www.qic.com
Message from Doug (continued)

New organisational structure                    Work is now progressing on the next             of Understanding (MOU) with the Korean
QIC’s new high-level functional structure       organisational levels and the functional        Investment Corporation. These initiatives
is complete (refer to page 3 for details),      areas of the business and we expect this        have helped us to expand our global
and we are now in the process of                process to be completed by the end of           presence and we are now focusing on
recruiting for outstanding roles in the new     September.                                      identifying opportunities that will further
leadership team.                                                                                enhance our global profile.
                                                Trevor Rowe’s departure
Some of these roles have already been           In July, Trevor Rowe advised me and the         Focus on delivering client outcomes
filled. I am pleased to announce that            Executive team that he would not be             While there will be further changes
Robert Hines has joined QIC as our new          seeking another term as Chairman of             at QIC as we continue to adapt to
Chief Financial and Operating Officer.           the Board of QIC when his current term          our constantly changing operating
Robert was formally CFO and then                expires at the end of September.                environment, one thing that will not
Head of the Retail Bank at the Bank of                                                          change is our focus on delivering client
Queensland and he brings a wealth of            Trevor’s passion and commitment to QIC,         outcomes. I am confident that my team at
knowledge and skills to QIC. To find out         along with that of the rest of the Board, is    QIC will embrace this period of change
more about Robert and his new role, read        one reason for QIC’s continuing success.        and I have no doubt that we will be
his profile on page 4.                           I thank him for the dedication and high         in an even better position to help you
                                                level of integrity he has shown for the past    overcome the challenges and exceed your
I also welcome Chris Nicholls, who has          eight years in his role as Chairman and         investment objectives.
commenced with QIC in the role of               wish him well for the future.
Managing Director – People, Culture &                                                           As usual, if you have any feedback,
Change in September.                            Growing global presence                         questions or challenges for me or the QIC
                                                It would be an understatement to say            team, please send them directly to me at
A role that hasn’t yet been filled is our        that 2008-2009 was a tough year for             d.mctaggart@qic.com.
new Head of Funds Management position.          investment returns. However, adversity
The person in this role will not be Chief       often leads to opportunity for the savvy
Investment Officer, but will provide             investor. Across all the asset classes we
leadership and direction to the various         manage, our portfolio managers have
asset classes and lead QIC’s shift to a         demonstrated strong discipline and              Doug McTaggart
more commercially-focused organisational        conviction and positioned their portfolios      Chief Executive
culture with regard to the provision of         for solid long-term performance. Because
investment solutions. Getting the right         of this, QIC is in an enviable position to
person in this role is critical for the         take advantage of the opportunities the
success of QIC’s future direction and we        current climate is presenting. This includes
are currently seeking candidates globally       opportunities overseas. QIC recently
for this position.                              opened up the Global Fixed Interest
                                                Alpha Fund to international investors and
                                                we have also entered into a Memorandum

Financial market snapshot
 Key Market Indicators (as at 31 August 2009)     FYTD             1 Year              3 Year             5 Year           10 Year

 Australian Shares                               14.4%              -8.1%               0.1%               9.5%              8.6%
 International Shares (Unhedged)                  7.9%             -14.9%              -8.6%              -0.8%             -2.8%
 International Shares (Hedged)                   11.4%             -18.4%              -6.0%               3.2%              0.7%

 Australian Bonds                                 1.0%               7.7%               6.3%               5.9%              6.2%
 International Bonds (Unhedged)                  -0.6%              10.7%               4.3%               2.4%              3.2%
 International Bonds (Hedged)                     2.0%               9.3%               7.9%               7.4%              7.7%

 Direct Property (Australia)                      1.0%             -15.2%                3.2%              7.5%              8.6%
 Listed Property (Australia)                     18.8%             -34.5%              -19.8%             -6.0%              3.3%

 Inflation (CPI)                                        -             1.5%                2.7%              2.9%              3.2%
High-level organisational structure and leadership team
                                                              Doug McTaggart

                                                                                                             Chief Financial and
                Head of Funds                                                                                Operating Officer
                 Management                                                                                    Robert Hines

      Investment Boutiques and Solutions

         Global                    Global                        MD Client                      MD Corporate
                                                               Relationships                                                MD Operations
      Fixed Interest              Real Estate                  + Distribution                      Strategy                 Darren Mundie
      Susan Buckley               Rob Carter                     Tony Cahill                    Michael Pennisi

          Global                    Global                    MD Investment                     MD Org Risk
                                                                                                                               MD Finance
      Infrastructure            Private Equity                   Services                         & Legal
                                                                                                                               Claire Blake
        Ross Israel            Marcus Simpson                 Margaret Sugden                   David Clarke

                                                              GM Economics                        MD People
        Strategy               Capital Markets                                                    Change &
                                                               & Research                          Culture
      Adriaan Ryder              Troy Rieck                   Matthew Peter                      Chris Nicholls

      Implemented             Australian Large
    Australian Equities      Companies Equities
      Stuart Birkett            Paul Barnes

    Australian Small            Quantitative
   Companies Equities           Management
     Stuart Jordan              Michiel Swaak

QIC Global Fixed Interest strengthens team
QIC Global Fixed Interest (QIC GFI) has           FX markets for Suncorp, AMP Hendersons,               the recruitment process had already
further strengthened its capabilities with two    Macquarie Bank, Merrill Lynch and the                 commenced. We wish Rob and Steve all the
senior appointments. Andrew Ticehurst has         Commonwealth Department of Treasury.                  best in meeting their new challenges.
been hired as a Senior Portfolio Manager,
GFI Macro, and Max Bulloch joins the team         Max joins QIC GFI from Cheyne Capital                 QIC GFI has been very pleased with the
as Senior Portfolio Manager, Investment           Management in London, where he was a                  quality of candidates that these and other
Grade Credit.                                     Partner and directly responsible for the              prospective roles have attracted. With
                                                  management of more than US$1billion.                  the team growing to more than 20 staff
Both Andrew and Max are high-caliber              Max has extensive international experience            in recent years, QIC GFI’s architect and
recruits who bring a wealth of experience         with a proven track record of performance,            Managing Director, Susan Buckley, is in
and a strong track record to the team.            particularly in long/short credit portfolios          constant contact with a range of prospective
                                                  and the innovative strategies used across             investment professionals who are keen to
With 20 years experience in financial              QIC GFI’s portfolios.                                 join her successful team.
markets, Andrew joins QIC GFI from the
National Australia Bank, where he was             Both appointments follow a global                     The hiring is set to continue, with QIC GFI
a proprietary trader in the FX Global             search for expertise to match the needs               confident of adding further depth to the GFI
Capital Management Group. Andrew also             of the growing team. They also follow                 Macro team very soon via another senior
has experience as an economist, strategist,       the departures of senior team member                  appointment.
portfolio manager, asset class head and           Rob Jewell and team member Steven
product champion across fixed income and           Smith in late July, who both left QIC after
Economic and market snapshot
The June quarter represented a turning                                     As is typically the case, global equity markets                             The Australian economy has proved to be
point for the stabilisation of the global                                  served as a barometer for the turnaround                                    resilient, with confidence rebounding and
economy, following its disastrous collapse in                              in economic conditions and began to rally                                   consumer spending remaining robust in
the wake of the failure of Lehman Brothers.                                in early March at a time when economic                                      the June quarter. Substantial fiscal handouts
A precondition for a break in the vicious                                  data releases in developed economies were                                   and robust labour market conditions have
cycle of plunging financial markets, collapsing                             still strongly negative. The rally extended                                 underpinned consumption growth, with
household and business confidence and                                       throughout the June quarter and into July, as                               the substantial fiscal handouts, low interest
falling economic activity was the arrest of                                data releases showed stabilising conditions                                 rates and only a moderate increase in
systemic risk to the global financial system.                               in the global economy and in financial                                       the unemployment rate. As in the rest of
Throughout the March quarter, central                                      markets, and as reported US company                                         the world, the equity market rally is also
banks formulated policies designed to                                      earnings outperformed market expectations.                                  buoying sentiment. While exhibiting signs
support the banking system and maintain                                    The recovery in equity markets has been                                     of slowing in the second half of 2008, the
the flow of credit to the economy. Many                                     rapid and has outpaced the recovery in the                                  housing market data has improved recently,
of these policies were initiated in the June                               real economy. According to most standard                                    with house prices and dwelling approvals
quarter and have resulted in a stabilisation                               valuation metrics, equity markets are now                                   rebounding in the June quarter as policy
of the global financial system.                                             close to fair value.                                                        initiatives stimulate activity. Indeed, the
                                                                                                                                                       RBA has moved to a neutral bias, with the
Governments also began or continued                                        Despite the better news over the June
                                                                                                                                                       Governor observing that “we can much
the implementation of large-scale fiscal                                    quarter, growth in most advanced
                                                                                                                                                       more easily imagine upside risks to the outlook,
packages in the June quarter. Economic                                     economies is only just beginning to emerge
                                                                                                                                                       to balance out the downside ones, than was
activity within the Asian region in particular                             from contraction, and stabilisation within
                                                                                                                                                       the case six months ago”.
has benefited from early and large fiscal and                                labour markets is unlikely until late in 2009
monetary stimulus. Major Asian economies                                   or in the first half of 2010. High rates of
such as China, Japan and South Korea have                                  unemployment will dampen consumer
implemented sizeable macroeconomic                                         spending in coming quarters, while fiscal
stimulus packages, and the region as a whole                               fade will begin to weigh on demand towards
is currently leading the stabilisation and                                 the end of 2010 and in the first half of 2011.
                                                                                                                                                                                    Matthew Peter
recovery of the global economy.                                            Consequently, the pace of recovery in the
                                                                           global economy will be gradual.                                                                          QIC Chief Economist

  QIC Forecast                          Australia                                                        US                                                             Europe

                                         Current         Dec-09          Jun-10                          Current         Dec-09          Jun-10                          Current         Dec-09          Jun-10

                                         3.00%           3.25%           3.50%                           0-0.25% 0-0.25% 0.50%                                           1.00%           1.00%           1.00%

                                              2008 2009                  2010                            2008            2009            2010                            2008            2009            2010

                                         2.3%            0.8%            2.6%                            0.4%            -2.6%           1.6%                            0.6%            -4.4%           0.6%

QIC welcomes Robert Hines
                           We are pleased to                                 funds management industry in his roles                                    • overseeing financial control and
                           welcome Robert Hines,                             as Chief Financial Officer at Suncorp and                                    profitability across QIC through
                           who has joined QIC as our                         Nat/West Markets and prior to that in a                                     appropriate planning, financial analysis,
                           new Chief Financial and                           government-owned company environment                                        reporting, monitoring and corrective
                           Operating Officer.                                 at Tarong Energy and Energex.                                               action

                   Robert joins us from Bank                                 In his new role, Robert will have a number                                • fulfilling statutory accounting
of Queensland, where he most recently held                                   of key responsibilities:                                                    responsibilities for QIC as a corporation
the position of Group Executive, Retail Financial                                                                                                      • providing advice and recommendations
Services, for two years, and the role of Chief                               • supporting the CEO in the achievement
                                                                                                                                                         to the Executive Leadership Team
Financial Officer for seven years prior to that.                                of QIC’s strategic and business objectives
                                                                                                                                                         members, CEO and Board
                                                                             • providing leadership and direction to
Robert has 25 years experience in retail and                                                                                                           • enabling strategic decision-making and
                                                                               the finance and operations functions to
investment banking in London, Brisbane and                                                                                                               recommending actions to achieve QIC’s
                                                                               meet QIC’s objectives
Sydney. Robert has also had exposure to the                                                                                                              objectives.

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Important information
QIC Limited ACN 130 539 123 (“QIC”) is a company government owned corporation constituted under the Queensland Investment Corporation Act 1991 (Qld). QIC is regulated by State Government legislation
pertaining to government owned corporations in addition to the Corporations Act 2001 (“Corporations Act”). QIC does not hold an Australian financial services (“AFS”) licence and certain provisions (including the
financial product disclosure provisions) of the Corporations Act do not apply to QIC. QIC, its subsidiaries, associated entities, their directors, employees and representatives (“the QIC Parties”) do not warrant the
accuracy or completeness of the information contained in this document (“the Information”). To the extent permitted by law, the QIC Parties disclaim all responsibility and liability for any loss or damage of any nature
whatsoever which may be suffered by any person directly or indirectly through relying on the Information, whether that loss or damage is caused by any fault or negligence of the QIC Parties or otherwise. The Information
is not intended to constitute advice and persons should seek professional advice before relying on the Information.

Contact + 61 7 3360 3800 or email qic@qic.com                                                                                                                                                         www.qic.com

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