ASX: PIA

Webinar

Jordan CvetanovskiCIO & Portfolio ManagerPengana International Equities

Destabilising Nature of Stability

EQUITIES HAVE BEEN A GREAT PLACE TO BE INVESTED

0% 5% 10% 15%

International Shares

Australian Shares

Australian Bonds

Cash

Average return 10 years per annum to December 2019

Source: Vanguard 10 year per annum to December 2019. Nominal gross figures, in AUD. Past performance is not a reliable indicator of future performance. The value of investments can go up and down. 2

STABILITY CAN OFTEN BRING INSTABILITY

MSCI ALL COUNTRY WORLD TOTAL RETURN INDEX (net, AUD)

3Source: Bloomberg

Chinese stock bubble

Global financial crisis, S&P500 falls by more than 50%

European soveriegn debt crisis

S&P500 falls by more than 20%

Chinese stock market crash

Global stock market downturn, S&P500 falls by more than 19%

COVID-19

0

50

100

150

200

250

300

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

YOU CAN’T BE BLAMED FOR WANTING TO RUN FOR THE HILLS

0

10

20

30

40

50

60

70

80

90

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

CBOE Volatility Index: VIXMay 1990 - May 2020

Average +1 Standard Deviation -1 Standard Deviation

2001 TerroristAttacks

Lehman Brothers Collapse

COVID

Pandemic

PIA.pengana.com

4

UNDERSTAND VOLATILITY AND EMBRACE IT

• Take advantage of the opportunities that volatile markets present

• Search for low volatility stocks that tend to outperform the high volatility stocks

• Structural and behavioural factors make a difference to returns

• Managing volatility can often exhibit better downside protection

• Key to long-term investing

PIA.pengana.com

5

RISK MODELS CAN BE HELPFUL

BUT THEY DON’T TELL YOU EVERYTHING …

PIA.pengana.com

6

FOCUS ON FUNDAMENTALS AND PORTFOLIO CONSTRUCTION

7

CORE BUSINESSES

60–80% Stable and growing

companies with

favourable tailwinds

Time

Valu

e

PIA.pengana.com

FOCUS ON FUNDAMENTALS AND PORTFOLIO CONSTRUCTION

8

CYCLICAL

0–30% Operating in cyclical

industries that are

poised for an upturnV

alu

e

Time

PIA.pengana.com

Buy

Sell

FOCUS ON FUNDAMENTALS AND PORTFOLIO CONSTRUCTION

9

OPPORTUNISTIC

0–20%

Unique company

specific situations

with attractive

potential upside

Valu

e

Time

PIA.pengana.com

Buy

PROFITING FROM VOLATILE MARKETS

10

0

10

20

30

40

50

60

Source: Bloomberg

Buy

Sell

Buy

11

• World largest provider of scientific equipment

and services

• Has been able to grow faster than the market

• Can expect share price gains to continue in

the future

• Robust long term growth prospects

• Defensive position in uncertain times

• 4.2% Free Cash flow Yield

• Low gearing

Image credits

Creator:JStill

Copyright:©John Still for Thermo Fisher ScientificPIA.pengana.com

VOLATILE MARKETS PRESENT OPPORTUNITIES

POSITIONED FOR POTENTIAL OUTPERFORMANCE

12As at 22 June 2020

Portfolio segment Weight FCF yield Rev CAGR Gearing Stocks

Core 66% 6.2% 7.5% 0.7 24

Cyclical 10% 9.1% -1.3% 1.2 5

Opportunistic 12% 4.1% 17.8% 1.2 4

Total 88% 6.5% 6.1% 0.8 33

Cash 12%

Total portfolio 100%

HOW THIS APPROACH HAS FARED

13Returns as at 31 May 2020. Past performance is not an indicator of future performance. Performance figures refer to the movement in net assets per share, reversing out the impact of option exercises and payments of dividends, before tax paid or accrued on realised and unrealised gains. Past performance is not a reliable indicator of future performance, the value of investments can go up and down.nception date of PIA: 19 March 2004, new investment team with new mandate adopted: 1 July 2017. Pengana International Equities Limited has been managed under the new investment mandate by the Pengana investment team since 1 July 2017.

Performance Pengana International Equities Limited - Net Returns (%)

PIA Benchmark PIA Benchmark

Down market capture since inception (%)

47.1 100.0Beta since inception

0.6 1.0

Volatility3

since inception (%)8.4 11.6

Maximum

drawdown (%)-7.7 -13.1

1 months 3 months 1 yearSince Inception of

strategy p.a.

PIA 4.6 3.8 17.9 10.8

Benchmark 3.4 -2.0 11.5 10.2

Relative performance 1.2 5.8 6.4 0.6

14

FULLY FRANKED DIVIDENDS

ASX: PIA

15

FULLY FRANKED DIVIDENDS2 TESTS

1.Profits in a specific period or having profit reserves,

sufficient to cover the dividend

• PIA is uniquely placed to satisfy the first test as it has $114 million of profits reserves, i.e. sufficient to

pay the current amount of fully franked dividends for the next several years.

2. Sufficient franking credits

(from tax paid on realised gains on investments)

• Highly liquid holdings

• True diversification of the portfolio

• Flexibility across medium-term holding periods

• The strategy is far more likely to result in the sale of stocks that make large gains

(i.e. that reach our price targets)

ASX: PIA

SUMMARY

16

Our key objectives1. make money

2. protect capital

3. manage volatility

• Understanding volatility is important and volatility should be embraced not feared.

• Valuation matters which means really understanding the businesses you invest in.

• Combining core, cyclical and opportunistic businesses can lead to long term outperformance.

PIA.pengana.com

Q & A

17

Pengana.com / PIA

IMPORTANT INFORMATION AND DISCLAIMER

18

Pengana Capital Limited (ABN 30 103 800 568, AFSL 226566) (“PCL”) is the issuer of units in the Pengana International Fund - Managed Risk (ARSN 612 382 260) (“Fund”). A product disclosure statement for the Fund is available and can be obtained from our distribution team or at www.pengana.com. A person should consider the product disclosure statement carefully and consult with their financial adviser before deciding whether to acquire, or to continue to hold, or making any other decision in respect of, the units in the Fund.

The performance calculations for the Fund in this report have been calculated net of fees and expenses, on a pre-tax basis and assume that all distributions are reinvested.

The value of investments can go up and down. Past performance is not a reliable indicator of future performance.

While care has been taken in the preparation of this report, none of PCL nor any of its related bodies corporate make any representation or warranty as to the accuracy, currency or

completeness of any statement, data or value. To the maximum extent permitted by law, PCL and its related bodies corporate expressly disclaim any liability which may arise out of the

provision to, or use by, any person of this report.

Relating to data in this report sourced from MSCI: Neither MSCI nor any other party involved in or relating to compiling, computing or creating the MSCI data makes any express or implied

warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy,

completeness, merchantability or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third

party involved in or related to compiling, computing or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits)

even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent.