Fund Update - 30 September 2020

Global Emerging Markets Fund

DisclaimerThis information is prepared by Paradice Investment Management Pty Ltd (ABN 64 090 148 619, AFSL No. 224158) (Paradice, we or us). This material is not intended to constitute advertising or advice (including legal, tax or investment advice) of any kind. These materials are not to be distributed and must not be copied, reproduced, published, disclosed or passed to any other person at any time without the prior written consent of Paradice. Equity Trustees Limited (ABN 46 004 031 298, AFSL No. 240975) (Equity Trustees) is the responsible entity of, and issuer of units in, the Paradice Global Emerging Markets Fund (ARSN 628 716 085) (Fund). Equity Trustees is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX:EQT). In deciding whether to acquire, or to continue to hold, units in the Fund please read the current product disclosure statement available from Paradice. Past performance of the Fund is not a reliable indicator of future performance. The value of an investment in the Fund may rise or fall. Returns are not guaranteed by any person. Total returns are calculated before tax and after ongoing management costs. We encourage you to think of investing as a long-term pursuit. In preparing this information, we have not considered your investment objectives, financial situation or needs and therefore the Fund may not be suitable for you. You should have regard to your own individual objectives, financial situation and needs and, if necessary, seek independent professional advice before you make any investment decision. Neither Paradice, Equity Trustees, nor any of their respective related parties, directors or employees, make any representation or warranty as to the accuracy, completeness, reasonableness or reliability of the information contained in this publication or accept liability or responsibility for any losses, whether direct, indirect or consequential, relating to, or arising from, the use or reliance on any part of this material. Any rates of return, forecasts orestimates contained in this publication are not guaranteed. The content of this publication is current as at the date of its publication and is subject to change at any time. It does not reflect any events or changes in circumstances occurring after the date of publication. The management fee is effective 5 May 2020. Prior to this date the management fee is 1.25% p.a.

Fund ObjectiveThe objective of the Fund is to outperform the MSCI Emerging Markets Net Total Return Index (AUD) over a three to five year period (after management costs and before tax).

Performance Net (%) 1Month

3Month

1Year

SinceInception*

p.a.Global Emerging Markets Fund 0.58 9.03 16.51 20.43MSCI Emerging Markets Net Total Return Index 1.53 5.24 4.02 5.31Excess Return -0.95 3.79 12.49 15.12* Inception date - 15 May 2019

Fund Details

APIR CodeFund Size (AUD m)Number of StocksWeighted Average Market Capitalization (AUD m)Fund CurrencyDistribution FrequencyManagement FeePerformance FeeBuy Sell SpreadMinimum Investment (AUD)

ETL2741AU$227

43$205,521

AUDSemi-Annually

1.00% p.a.15% p.a.+/-0.40%$20,000

Top 10 PositionsWeight %

Alibaba Group Holding Ltd. 5.43Taiwan Semiconductor Manufacturing Co. 5.40Reliance Industries Ltd. 5.04Tencent Holdings Ltd. 4.57New Oriental Education & Technology Group 4.20AIA Group Ltd. 3.63HDFC Bank Ltd. 3.60B2W Companhia Digital 3.37Yandex NV Class A 3.06Li Ning Company Ltd. 3.02

Country Allocation

China 38.54%

India 14.57%Taiwan 9.41%

Hong Kong 7.03%

Brazil 6.96%

Russian Federation

3.06%

Korea 2.54%

Other EM 4.15%

Developed 8.56%

Cash 5.17%

Sector AllocationCommunication

Services 11.65%

Consumer

Discretionary

24.29%

Consumer Staples

8.72%

Energy 5.04%Financials 12.09%

Health Care 3.18%

Industrials 7.90%

Information

Technology 14.05%

Materials 4.29%

Real Estate 3.63%

Cash 5.17%

Growth of AUD 10,000

May-19 Sep-19 Jan-20 May-20 Oct-20

9,000

10,000

11,000

12,000

13,000

May-19 Sep-19 Jan-20 May-20 Sep-20

9,000

10,000

11,000

12,000

13,000

Global Emerging Markets FundGlobal Emerging Markets Fund

MSCI Emerging Markets Net Total Return Index

Contact

Phone: 02 8227 7400

Email: distribution@paradice.com

Website: www.paradice.com

Commentary

MARKET REVIEW

For the purpose of comparison, commentary is quoted in AUD terms except where stated otherwise.

The Paradice Global Emerging Markets Fund was up 9.03% in Q3 2020 as compared to its benchmark, the MSCI EM Net Total Return Index, which was up 5.24%. Markets continued to show a recovery despite COVID-19 still affecting numerous geographies, and with much of the global economy still heavily reliant on government stimulus. On a CYTD basis, the EM index has almost fully retraced its pre-COVID levels. Despite overall US dollar weakness, EM FX only contributed modestly to EM returns in the quarter.

Similar to CYTD performance, Q3 was led by North Asia which includes China, Taiwan, and South Korea, up 8.06%, 11.94%, and 8.38% respectively. India was another strong contributor, up 10.42%. The rest of the markets including Latin America, Eastern Europe, and ASEAN all underperformed. The worst performers in Latin America were Chile and Brazil down 7.97% and 7.13% respectively. Within ASEAN, Thailand and Indonesia were the laggards, down 17.45% and 10.53% respectively. Within Eastern Europe, Hungary, the Czech Republic, and Russia underperformed, down 12.53%, 9.88%, 8.47% respectively.

From a sector standpoint, consumer discretionary and information technology showed the strongest recovery up 21.83% and 15.76% respectively. Materials was the only other relative outperformer up 7.22%. Troubled sectors on a CYTD basis remained the troubled sectors in Q3 - financials, energy, real estate, and utilities down 4.44%, 4.40%, 3.04%, and 8.16% respectively.

Overall, the markets continue to show a strong dichotomy between the haves and have-nots. Those countries on more sound economic footing with COVID more under control continue to fare better. While we are seeing some recovery in consumer-focused areas, the most cyclical sectors continue to struggle.

PERFORMANCE

In Q3 the Paradice Global Emerging Markets Fund performed well on a relative and absolute basis. From a country attribution perspective, China, Taiwan, and Russia were the greatest positive contributors, while Brazil and Korea detracted most.

The top contributors to performance for the quarter were:

Taiwan Semiconductor (Taiwan) TSMC is the world’s leading semiconductor foundry controlling over 50% of the market. The company benefitted this quarter from a strong earnings report and positive guidance. Additionally, in late July Intel announced a further delay on the leading edge (7nm) and is now considering outsourcing of manufacturing which would reduce the number of players on leading edge from three to two (the other being Samsung).

Alibaba (China) Alibaba is one of China’s leading digital platforms having expanded beyond just eCommerce with leadership in cloud, payments, online grocery, local services, and logistics. The company benefitted from continued digitalization of Chinese consumers and businesses. In core ecommerce the company continues to show increasing engagement and purchase frequency while business segments outside of core ecommerce are growing faster with losses shrinking. Additionally, at the company’s investor day in late September, management highlighted that AliCloud would turn profitable and Cainiao would generate positive operating cash flow in FY21.

Reliance Industries (India) Reliance Industries is transforming from a 2B business focused on petrochemicals and refining to a 2C business focused on the digitalization of India through cheap and fast internet/data. Growth in the future will be driven by Jio Platforms and Retail, where JioMart sits. Over the last five months, Reliance has been seeking out strategic investors and partners to help it grow these businesses which has helped crystallize the value in these business units while also providing additional insight on what the end game could be for Reliance.

The top detractors from performance for the quarter were:

B2W Companhia Digital (Brazil) B2W is one of Brazil’s leading e-commerce platforms and continued to show strong fundamentals in its Q2 results on the back of accelerated digital adoption from COVID. The company’s weakness since the end of July has likely been due to a weaker macro backdrop in Brazil and BRL weakness coupled with some profit taking. The longer-term story of rising ecommerce penetration, online grocery adoption, and potential fintech optionality remains intact.

Rumo (Brazil) Rumo is the main railway operator transporting grains from inner Brazil to the ports. While business has been impacted by COVID (weaker Q2), near term weakness is likely more a function of Brazil’s macro environment, FX, and interest rates given the asset is very long duration. Additionally, potential for more competition as well as lack of visibility with a couple of projects add to the short-term headwinds. We believe the valuation remains compelling but likely won’t see any positive catalysts until 2021.

PT Telekomunikasi Indonesia (Indonesia) PT Telkom is the dominant telco in Indonesia providing local fixed-line, mobile, and data services. Although Indonesia is experiencing a surge in data usage this year, persistent competitive intensity continues to pressure data pricing. In addition, the company’s enterprise business has proven to be more cyclical than expected and was negatively impacted by COVID.

Commentary

PORTFOLIO CHANGES

We initiated three new positions and exited three positions in Q3. After a more elevated level of transactions in the first half of the year, we have returned to a more normal level of turnover. In the quarter we purchased a Chinese online media company, a Taiwanese semiconductor company, and a Chinese auto dealer. Two of the positions we exited in the quarter were on account of value having been realised while one was a result of a change in investment thesis.

OUTLOOK

While Q3 performance was strong overall, the recovery still seems largely dependent on government stimulus measures with the United States one of the key countries to watch. If we take the US Fed at face value, Powell has stated the Fed will keep interest rates at near zero for years until the US economy heals from the effects of the pandemic and the labor market improves. He has also been vocal that the Fed is not out of ammo. A coordinated effort by the US Congress on the fiscal side and the Fed would likely continue to bolster risk assets and provide EM geographies with cover to stimulate as well.

As the markets have rallied substantially off their March lows and portions of the economy are re-opening, we would expect the market to be focused more on the follow through of the fundamental recovery vs just the prospect of it happening. Near term volatility is likely to remain elevated with the US elections around the corner and with US/China tensions still ongoing since 2018. As new technologies become increasingly dependent on semiconductors, Taiwan has become a key linchpin in the Sino-American technology race. In other areas, it is worth noting that Brazil has seen delays with its reform agenda and heightened political turmoil surrounding the country’s fiscal position, and Russia faces the prospect of additional sanctions. While the markets might receive vaccine news well, we are not convinced it will be the panacea that will lead to an instant return to pre-COVID activity. Given we don’t yet have adequate testing everywhere, one should question how quickly a vaccine could reach a majority of the population as well as the effectiveness if new strains begin to emerge.

As we have stated time and again though, we at Paradice are bottom-up investors focused on generating long term value for our shareholders. We prefer to spend our time continuing to look for business models that we believe can transcend this difficult environment. From a pipeline perspective there remains a continuous flow of companies we are reviewing and vetting, but our disciplined long - term focus means that we are in the habit of saying no much more often than yes.