To protect and enhance investor wealth on a consistent and repeatable basis.

Significant Benefits of Investing in the Pengana Australian Equities Fund

The Fund offers investors the following benefits:

• Access to Pengana's investment expertise;

• Participation in an investment strategy with an objective of enhancing and preserving investor wealth over a 5 year period;
• Exposure to investment opportunities that individual investors may not be able to access on their own; and
• Active portfolio risk management focused on the risk of losing capital.

• Investors seeking a truly active investment approach, with a focus on capital preservation.

• Investors looking for genuine diversification benefits to other equities holdings.

• Investors seeking absolute positive returns.

• Investors with an investment time horizon of at least five years.

Five Reasons to Invest

ONE: Key focus on capital preservation and downside protection

The Fund does not focus on beating the market. The focus is on preserving capital and generating a fair return of at least 6% above the cash rate.

TWO: Common sense investment approach

The team looks for good businesses with transparent and resilient business models run by competent management at the right price.

THREE: Investment flexibility

The Fund is benchmark unaware and selects companies purely on their investment merits and their ability to deliver a fair return, not based on their weighting in the index.

FOUR: Alignment of interests

The investment team are significant investors in the Fund. The focus is on generating performance not increasing the Fund's size. The Fund's capacity will be limited to maintain performance.

FIVE: Nine year track record

The Fund has a strong track record over the 9 years since inception on 1 July 2008 and has produced positive returns in each year despite market volatility.

Investment Philosophy

The Fund seeks to generate consistent superior investment returns using fundamental analysis to select and own securities with the following characteristics:

• Good businesses with transparent and resilient business models.
• Competent management with a track record of integrity.
• A favourable relationship between the market price and the future cash flows of the business.

Investment Strategy

The Fund seeks to identify good quality companies that are reasonably priced by focusing on their operating leverage, balance sheet and return to shareholders in order to identify stocks that can generate at acquisition, an after tax cash earnings yield of 6-8% p.a. with strong growth for the medium term.

We undertake our own proprietary research in assessing both qualitative and quantitative factors to build a concentrated portfolio of stocks.

A focus on capital preservation is preferred to super' returns and cash holdings are viewed as a natural alternative when suitable equity investment opportunities cannot be identified.

Investment Return Objective

The Fund's investment objective is to achieve over the medium to long term an investment return, including capital appreciation, dividends and interest, in excess of the risk free rate (i.e., the Reserve Bank of Australia's Cash Rate Target) plus a margin to compensate investors for the extra risk associated with investing in Australian equities (this is known as the "Australian equity risk premium), with a volatility of return less than the Australian equity market.

Investment Approach

Pengana believes that superior research provides conviction and, if acted upon in a timely manner, can be converted into investment opportunities and excess returns. Capital preservation is preferred over supernormal returns. This is achieved through a consistent focus in the security selection process and careful management of portfolio exposure. The Fund employs research-based security selection, using fundamental company research with macro economic overlays for portfolio construction. All positions are high conviction and assessed on a risk-reward basis, resulting in a portfolio with around 20-25 securities being held.

How we invest your money

Investment Process

The Fund's Investment Team attends many company management meetings each year as an integral part of the idea generation, company valuation and portfolio management processes. Access to external research is considered a valuable resource in supplementing idea generation, understanding industries and facilitating access to company management.

Pengana maintains a database of valuation models on potential and existing investment opportunities. This is supported by regular updates from the fundamental research and this forms the analysis platform for assessing the appropriate acquisition price. Pengana principally targets listed Australian companies capable of generating sustainable underlying cash earnings yields of 6 to 8% per annum with growth of 10 to 15% per annum. In addition, for capital preservation purposes, the company valuation is assessed with a margin of safety. This may be in the form of a strong underlying intrinsic asset valuation, low earnings multiple, regulated monopoly or other factors. When Pengana is unable to find investments that meet its investment strategy, surplus funds will be held in cash or cash equivalents consistent with its objective of capital preservation. The Fund may invest in securities which are not listed in Australia but are listed on an overseas stock exchange. It will only do so if Pengana determines that the security listed on the overseas stock exchange is a better investment proposition than a similar security listed in Australia.

Indicative Strategic Asset Allocation

Pengana aims to manage the Fund within the following guidelines:

• 0%-100% Australian equity securities and hybrids

• 0%-100% cash and cash equivalents

• 0%-20% listed bonds, securities in exchange traded funds, securities which are expected to be listed within 3 months of being acquired, derivatives and securities which are not listed in Australia but are listed on an overseas stock exchange
• Pengana will endeavour to work within the above guidelines - however these should be viewed as objectives only and not absolute limits.

Use of Derivatives

Derivatives may be used to:

• achieve long or short exposures;

• reduce risk; and
• reduce transaction costs.

Derivatives will not be used for the purposes of leverage and the Fund's net exposure will never be short. All derivative use will be within the exceptions set out in the definition of a hedge fund in ASIC's Regulatory Guide 240: Hedge Funds: Improving Disclosure so that the Fund will not fall within this definition of a hedge fund.