The fund manager discusses how the Macquarie Income Opportunities Fund navigated volatile market conditions over the past year by taking several defensive steps: 1) It significantly reduced credit risk by exiting high yield and emerging markets, 2) It increased physical cash levels to preserve liquidity, and 3) It added interest rate duration to the fund as a hedge. These actions helped preserve investors' capital. Now that credit spreads have widened further, the manager believes the fund is well positioned to take advantage of attractive investment opportunities.

1. A challenging period
for financial markets –
credit no exception
INVESTMENT MANAGEMENT | DECEMBER 2015
In the past 12 months, financial markets have experienced considerable volatility as a
result of global macro events from collapsing commodity prices, the Greek debt crisis,
and US Federal Reserve (Fed) uncertainty. During this period, credit spreads have
effectively doubled, making it a challenging time for any investment manager.
The Macquarie Income Opportunities Fund (MIO), has faced significant market volatility in the past for example in 2008 and 2011.
During such periods we not only preserved our investors’ capital but also took advantage of the subsequent opportunities that
presented themselves (chart below). Similarly, in 2015 we protected the portfolio in times of severe market stress and now believe
we are in a position to take advantage of the opportunities on offer, at more attractive spread levels, once volatility subsides.
In the following paragraphs we will discuss how we have defensively managed the portfolio during this turbulent time, and
the opportunity set that now presents itself.
Chart 1: MIO returns vs investment grade spreads in times of stress
140
190
290
440
240
340
540
390
490
590
■ Investment grade spreads ■ MIO returns (RHS)
BPS
MIOINDEXEDRETURN(%)
Jan 08 Sep 10 Jun 13 Nov 14Feb 12May 09
0.9
1.0
1.1
1.2
1.3
1.4
1.5
European
sovereign crisis
Global financial crisis
Greece, China and
commodity weakness
Greek crisis
US taper tantrum
Past performance is not a reliable indicator of future performance.
Source: Barclays (Investment Grade spread). The MIO indexed return is a time series post-fee return for the Macquarie Income Opportunities Fund. The time series
return starts at 1 on 1, January 2008 and is compounded daily thereafter. Data as at 10 December 2015
For advisers only – not for distribution to retail investors
In times of stress we protect the Fund, then seek
opportunities when volatility subsides

2. 2
Macquarie Income Opportunities Fund
Navigating this environment – a focus on capital preservation
The Macquarie Fixed Income and Currency team’s investment philosophy is based on capital preservation coupled with a
strong respect for liquidity. During this period of recent credit spread widening the team has managed the Macquarie Income
Opportunities Fund in line with that philosophy, and took the following steps.
1. We significantly reduced our credit risk – to counter spreads widening and market uncertainty.
2. We increased our physical cash levels – to support liquidity and minimise drawdowns.
3. We added interest rate duration to the Fund – in line with our capital preservation philosophy.
1
We significantly reduced our credit risk
We exited both the high yield (HY) and emerging markets (EM) sectors in 2013 as we believed we were not compensated
for the level of risk. We remained out of these sectors throughout 2014. Having avoided the subsequent widening in these
sectors in 2014, we re-entered the high yield market in January 2015 when spreads passed 500 bps and provided good
value (as per the chart below).
Throughout the most recent and severe period of volatility, starting in July 2015, we actively hedged our allocation to high yield.
Chart 2: Fund positioning as spreads widened over the past 16 months
300
350
450
550
400
500
600
650
■ HY ■ EM
BPS
Dec 15Jun 14 Oct 14 Feb 15 Jun 15 Aug 15 Oct 15Apr 15Dec 14Aug 14
“Tightest” point
post-crisis
MIO not invested in HY or EM Invested in HY;
No EM
Actively hedging HY
exposure; No EM
Source: Bloomberg and Macquarie December 2015, high yield and emerging market spreads represented by the relevant Barclays spread index
Throughout the most recent and severe period of
volatility, starting in July 2015, we actively hedged
our allocation to high yield.
For advisers only – not for distribution to retail investors

3. 3
Macquarie Income Opportunities Fund
2
We increased our physical cash levels
In line with our philosophical respect for liquidity and to protect our Fund, we have consistently increased our cash holdings
(as shown in the chart below). This activity has provided a buffer against the widening of credit spreads.
We now have 20 per cent in cash that we can redeploy at higher spreads. This will enable us to increase the yield to
maturity of the Fund and assist in providing investors with regular income.
Chart 3: Reducing credit exposure and increasing cash
5%
10%
20%
30%
15%
25%
35%
40%
■ Total cash ■ Physical cash
PORTFOLIOHOLDING
Aug 15Jun 14 Oct 14 Feb 15 Jun 15Apr 15Dec 14Aug 14
Recent MIO cash holdings
Increasing cash to preserve liquidity
Source: Macquarie October 2015
3
We added interest rate duration to the Fund
Following our capital preservation bias, we made the decision to add some duration to the Fund as a hedge, as duration
risk is negatively correlated to credit risk.
As per the chart below we added almost one year of interest rate duration. This position protected the Fund as bond
markets rallied particularly in September.
Chart 4: Increasing duration to protect the Fund
0.1
0.2
0.4
0.6
0.3
0.5
0.7
0.8
0.9
YEARS
Sep 15Jun 14 Sep 14 Jan 15 May 15 Jul 15Mar 15Nov 14Aug 14
MIO Interest rate duration
Source: Macquarie October 2015
For advisers only – not for distribution to retail investors

4. 4
Macquarie Income Opportunities Fund
This information has been prepared by Macquarie Investment Management Limited ABN 66 002 867 003 AFS Licence 237492, the issuer of units in the Macquarie Income Opportunities
Fund (Fund). The information in this document is provided for general information purposes only and does not take into account the investment objectives, financial situation or needs of any
person. It should not be relied upon in determining whether to invest in the Fund. In deciding whether to acquire or continue to hold an investment in the Fund, an investor should consider
the Fund’s product disclosure statement. The product disclosure statement is available on our website at macquarie.com.au/pds or by contacting us on 1800 814 523. Past performance
information is for illustrative purposes only and is not indicative of future performance.
Investments in the Fund are not deposits with, or other liabilities of, Macquarie Bank Limited or of any other member of the Macquarie Group and are subject to investment risk, including
possible delays in repayment and loss of income and principal invested. Neither Macquarie Bank Limited nor any other member of the Macquarie Group guarantees the performance of the
Fund or the repayment of capital from a Fund, or any particular rate of return.
Outlook – credit now offering better value
While the steps we took certainly helped the Fund preserve capital, the Fund was not entirely immune from the extreme
global weakness as credit risk increased and credit spreads widened. We have always been clear that while the Fund is
defensive there will be occasions, and this was one of them, when the Fund is affected by extreme market conditions.
Going forward, credit markets appear to be providing more value, which is especially the case in global markets. As per
the chart below and given our level of physical cash, we believe the Fund is well positioned to take advantage of future
opportunities. Though we remain cautious, we look forward to taking advantage of the new value on offer, especially in global
credit as highlighted below.
Chart 5: US and Australian IG credit spreads
■ US ■ Australia
BPS
Dec 15Sep 15Jun 15Mar 15Dec 14Sep 14Jun 14
80
100
120
140
160
180
+57bps
+43bps
Source: Barclays, October 2015, the orange and blue numbers represent the increase in spreads since June 2014
For advisers only – not for distribution to retail investors MIM112 12/15
Risks
All investments carry risk. Different investments carry
different levels of risk, depending on the investment strategy
and the underlying assets. Generally, the higher the potential
return of an investment, the greater the risk. Some of the
risks of investing in this Fund are detailed below.
Investment risk – The Fund seeks to generate higher
returns than traditional cash investments. The risk of an
investment in the Fund is higher than an investment in a
typical bank account or term deposit. Amounts distributed
to unitholders may fluctuate, as may the Fund’s unit price.
The unit price may vary by material amounts, even over
short periods of time, including during the period between
a redemption request being made and the time the
redemption unit price is calculated.
Manager risk – There is no guarantee that the Fund will
achieve its performance objectives, produce returns that
are positive, or compare favourably against its peers. The
manager may change its investment strategies and internal
trading guidelines over time, and there is no guarantee that
such changes would produce favourable outcomes.
Income securities risk – The Fund may have exposure to
a range of income securities, including high yield, merging
markets, and structured securities. The value of these securities
may fall, for example due to market volatility, interest rate
movements, perceptions of credit quality, supply and demand
pressures, market sentiment, or issuer default. These risks may
be greater for securities offering higher returns, for example
high yield or merging market securities. Income security risk
may cause unit price volatility and/or financial loss to the Fund.
For a full description of the risks of investing in the Fund,
investors should read the Product Disclosure Statement
before deciding to invest in the Fund.