Factsheet

Pendal MidCap Fund Equity Strategies

ARSN: 130 466 581 April 2020

About the Fund Performance The Pendal MidCap Fund (Fund) is an actively managed portfolio of Australian ( %) Total Returns Benchmark mid cap shares. (post-fee) (pre-fee) Return Investment Return Objective 1 month 13.31 13.19 14.58 The Fund aims to provide a return (before fees, costs and taxes) that exceeds 3 months -12.93 -12.61 -18.50 the Pendal MidCap Custom Index over the medium to long term. The suggested investment timeframe is five years or more. 6 months -8.40 -7.85 -12.58 Description of Fund 1 year (pa) -3.35 -2.32 -9.95 This Fund is designed for investors who want the potential for long term capital 3 years (pa) 5.80 7.08 3.35 growth and tax effective income from a portfolio of primarily 40-60 Australian mid 5 years (pa) 7.19 8.42 6.34 cap shares and are prepared to accept higher variability of returns. Pendal 7 years (pa) 9.98 11.44 8.18 defines the mid cap universe to include companies ranked between 51 and 150 of the S&P/ASX 200 Index. The Fund may also invest in equivalent companies 10 years (pa) 9.13 10.79 6.60 listed on the New Zealand Stock Exchange, hold cash and may use derivatives. Since 8.72 10.75 4.52 Inception (pa)

Pendal’s investment process for Australian shares is based on our core investment style and aims to add value through active stock selection and fundamental company research. Pendal’s core investment style is to select Sector Allocation (as at 30 April 2020) stocks based on our assessment of their long term worth and ability to outperform the market, without being restricted by a growth or value bias. Our Energy 1.7% fundamental company research focuses on valuation, franchise, management Materials 20.2% quality and risk factors (both financial and non-financial risk). Industrials 20.3% The Fund may have assets denominated in foreign currencies. This means that Consumer Discretionary 9.5% changes in the value of the Australian dollar relative to foreign currencies may Consumer Staples 11.9% affect the value of the assets of the Fund. The Fund’s foreign currency exposure Health Care 7.3% may be hedged from time to time, in whole or part. Information Technology 9.9% Derivatives may be used to reduce risk and can act as a hedge against adverse Telecommunication Services 7.4% movements in a particular market and/or in the underlying assets. Derivatives Financials ex Property Trusts 1.6% can also be used to gain exposure to assets and markets. Property Trusts 4.0% Investment Team

Cash & other 6.2% Pendal’s Equity team is headed up by Crispin Murray who has extensive experience and a strong record in equities research. Andrew Waddington is the Top 10 Holdings (as at 30 April 2020) portfolio manager for the Fund. Limited 6.2% A combination of the Australian equities large cap and small cap teams' research Ltd 5.7% is used to construct the Pendal MidCap Fund. Limited 5.3%

Atlas Arteria 5.0% Investment Guidelines Metcash Trading Limited 4.9% Investable universe ASX and NZX listed and soon to be listed Co Ltd 4.9% companies, generally with a market capitalisation Resmed Inc 4.8% of A$0.5 billion to A$5 billion; derivatives; cash JB Hi-Fi Limited 4.8% Investment ranges Australian shares 80 - 100% Northern Star Resources 3.3% New Zealand shares 0 - 10% Monadelphous Group Limited 3.1% Cash 0 - 20% Other Information Ex-ante tracking error 3 – 8% Fund size (as at 30 Apr 2020) $416 million Number of stocks Typically 40 – 60 Date of inception June 2008 Absolute stock position 15% Minimum investment $25,000 Maximum active stock position +/- 5%1 Buy-sell spread2 Maximum active sector +/- 10%1 For the Fund's current buy-sell spread information, position relative to index visit www.pendalgroup.com 1 compared to benchmark. Distribution frequency Quarterly

APIR code BTA0313AU 2 The buy-sell spread represents transaction costs incurred whenever you invest or withdraw funds, and may vary from time to time without notice.

Management Costs3 Inside IT, (APT, +66.0%) rallied strongly on the back of

4 the continued surge in tech growth stocks in the US, with the Issuer fee 0.90% p.a. NASDAQ re-approaching its highs on the back of Amazon. The company also updated the market: the Australian business Performance fee5 20% x the Fund’s performance continues to track well, although management were more cautious (before fees) in excess of the on the outlook for the US, which is consistent with the health performance hurdle outcomes unfolding in each country. Other strong performers inside the same sector include Xero (XRO, +17.1%), (ALU, 3 You should refer to the latest Product Disclosure Statement for full details of fees and other costs you may be charged. +19.5%) and Appen (APX, +31.2%). 4 This is the fee we charge for overseeing the operations of the Fund and The scale of the Job Keeper package and signs of success in managing the assets of the Fund. The Issuer fee is paid from the assets of the containment have seen people focus less on the worst case Fund and is reflected in the unit price of your investment. outcomes. Instead, there is a view that the authorities will have a 5 The Fund's performance fee is 20% of the Fund's performance in excess of the greater degree of control over when and how measures can be performance hurdle. The performance hurdle is the performance of the benchmark (Pendal MidCap Custom Index) plus the issuer fee of 0.90% pa. If a rolled back, which may lead to shorter lockdown time than people performance fee is payable, it is charged in addition to the issuer fee. The fee is fear. This benefited the domestic oriented businesses within the calculated each Business Day based on the investment performance and value Consumer Discretionary sector, including Tabcorp (TAH, +27.3%) of the Fund on that day. If we are entitled to a performance fee, it is paid to us as and JB Hi-Fi (JBH, +25.6%). In addition, Star Entertainment (SRG, at 30 June each year. +40.9%) gave an update which included an additional debt funding

facilities of $200m, with management now confident they have an ability to ride out an extended shut down. Risks An investment in the Fund involves risk, including: On the other end of the spectrum, weaker performance from  Market risk: The risk that factors affecting one or more countries Metcash (MTS) weighed on Consumer Staples (+2.7%). MTS fell - that can influence the direction and volatility of an overall market, 21% after it tapped the market for an additional $330m of equity as opposed to security-specific risks. capital. The placement spooked the market, which focused on management comments that part of the money was needed to  Security specific risk: The risks associated with an individual support some distributors in the liquor division which have been security. impacted by the closure of pubs and clubs – as well as the more Please read the Fund’s Product Disclosure Statement (PDS) for a stringent lockdowns in NZ. This accounts for around one third of detailed explanation of each of these risks. the raising, with part of the remainder needed to fund the working capital necessary to fund the rise in volumes as a result of strong demand. Management also wanted powder to be able to take advantage of any acquisition opportunities in this environment. Market review Fund performance The Australian equities market orchestrated a strong rebound in The Fund underperformed the benchmark over the month of April. April, adding +9.0% to the S&P/ASX 300 Accumulation index. This also extended the recovery from the market’s recent trough on Contributors March 23rd to ~22%. Helped by the small caps, the S&P/ASX 51- Overweight Seven Group Holdings 150 Accumulation index gained by +14.6%. Market sentiment has clearly improved in the near-term, on the back of strong support A growing expectation that state and Federal governments will globally by central banks, the Fed in particular. Resources start to ease restrictions in coming weeks saw a surge in (+21.1%) recouped a great portion of losses incurred last month, domestically-focused cyclical stocks such as SVW. Despite the whereas Industrials (+13.0%) underperformed the headline index. market’s initial concerns, SVW’s business has been largely The oil price bounced 20% from its intra-month low, as some pick- unaffected by the Covid-19 restrictions. There has been little effect up in demand will slow the rate at which storage is filled. on demand for its WesTrac franchise, as mines have remained operational. Coates Hire has seen demand related to events fall, On the COVID-19 front, global new daily cases remains on a but this is a small part of the business. We continue to see SVW as plateau, with Latin America offsetting improvements elsewhere. well placed given the necessary spending from miners and also Roughly half of the states in the US have begun to relax the transport infrastructure pipeline. Any move to accelerate the restrictions, despite the fact that case numbers are not falling latter as part of economic stimulus will also be beneficial. significantly. The focus in coming weeks will be on whether it has reopened too soon. Testing levels are far higher today than was Overweight Nine Entertainment the case a month ago – this allows pockets to be identified faster and local containments measures put in place, rather than a Optimism over the relaxation over restrictions saw a bounce in nation-wide shutdown. In Singapore, the second wave of infections some previous laggards such as Nine (NEC, +24.5%). The scale seems to be under control. Daily testing in Australia has roughly of the Job Keeper package and signs of success in containment doubled. This has seen new cases pick up, but overall we remain have seen people focus less on the worst case outcomes. Instead, at very low levels. there is a view that the authorities will have a greater degree of control over when and how measures can be rolled back, which In terms of sector performance, gains were largely led by Materials may lead to shorter lockdown time than people fear. We are (+20.4%), Information Technology (21.9%), Consumer mindful of the possible scenario where there is less uncertainty for Discretionary (+21.0%) and Energy (+20.7%). Gold miners, Australian companies with a domestic focus, rather than those with including (EVN, +33.8%), Northern Star overseas exposure. Resources (NST, +21.5%) as well as Saracen Mineral (SAR, +18.3%). The precious metal continues to trade at heightened Detractors levels despite the recent improvement in risk appetite. Sector Overweight Metcash heavyweight EVN also delivered its quarterly update during the month, which confirmed that the strong gold price has allowed it to Metcash (MTS) fell -21% after it tapped the market for an pay down some of the debt it took on to fund its Redlake mine additional $330m of equity capital. The placement spooked the acquisition in Canada. market, which focused on management comments that part of the money was needed to support some distributors in the liquor division which have been impacted by the closure of pubs and clubs – as well as the more stringent lockdowns in NZ. In our view, only a small part of its business is impacted – around 20% of its liquor division – while the trading update accompanying the raise

illustrated the strength in the rest of the company. This accounts Crown (CWN) and ALS (ALQ). At the same time, we have a for around one third of the raising, with part of the remainder solid cohort of more defensive positions which will protect the needed to fund the working capital necessary to fund the rise in portfolio if we see the path to recovery disrupted. Examples volumes as a result of strong demand. Management also wanted here include ResMed (RMD), Metcash (MTS) and gold miner powder to be able to take advantage of any acquisition Saracen (SAR). We have stocks which should benefit from opportunities in this environment. While the raising is dilutive, we government initiatives to help underpin economic recovery, believe that the capital is earmarked for sensible use, the business such as Seven Group (SVW). remains well positioned, and there is scope for its return if we do start to see economic activity start to recover. The essential tussle at the heart of markets is between the largest economic hit in living memory on one hand – and a Not holding Afterpay package of unprecedented liquidity and fiscal support on the Afterpay (APT, +34.6%) rallied strongly on the back of the other. continued surge in tech growth stocks in the US, with the NASDAQ re-approaching its highs on the back of Amazon. The company The scale of the economic hit is still unknown, however the also updated the market: the Australian business continues to pathway to normalisation is a key variable. Infection rates will track well, although management were more cautious on the be crucial in coming weeks as restrictions are eased. Signs outlook for the US, which is consistent with the health outcomes that rates remain manageable will be positive – a material unfolding in each country. We are also mindful that people may be second wave of infections, that requires re-implemented using APT to help address near term cash flow issues while restrictions, would be a material negative. waiting for government payments. Looking through this, there is still the possibility that we see materially softer baseline of In recent weeks we have seen increasing signs of a possible consumer demand, which may impact on APT’s volumes. divergence in outlook for Australia and NZ compared to other parts of the world. Strategy and outlook The scale and speed of containment measures here - coupled The portfolio recouped some of its fall in April, as markets with geography and a less complicated political backdrop than rebounded on improved sentiment. The portfolio tracked ahead the US or Europe – means that we can try a of the index for most of April, although it lagged a surge into suppression/elimination strategy. In other parts of the world the the month’s end, which meant it finished slightly behind. only option is to build herd immunity, while keeping infections However it has still held up better than the benchmark over the at rate with which medical systems can cope. calendar year to date. The implication is that we may see domestic restrictions lifted While the current environment is unusually challenging we are further here, while international borders remain locked down. also conscious that, in terms of the ability to buy great Overseas, the need to control infection rates may mean that businesses at depressed prices, opportunities such as this restrictions are only partially lifted and possibly periodically come along very few times in an investment career. We have reinstated in specific locations. This is supportive for the also been taking advantage of this opportunity, adding outlook for domestically-focused companies on the ASX. positions in Reece (REH) among others. The recent bounce reflected optimism at a pathway to Within smaller companies we are focusing on four key recovery. However we are unlikely to recover swiftly to a pre- considerations when assessing opportunities; coronavirus level of activity. As restrictions are rolled back and We have seen a steady flow of equity capital raising in recent we embark of the process of discovery to assess the degree of weeks. In some cases this has been driven by severe stress economic damage, we think it will be harder for the market to on companies at the front line of disruption, or with weaker sustain its recent rally. balance sheets. We have avoided these ones. However we That said, we are also mindful of the scale of liquidity have selectively participated in several where the business supporting markets. This certainly provides a strong degree of remains in decent shape but management are being prudent downside support. (eg IDP Education (IEL), Invocare (IVC), and (AIA), among others). We see this phase as being very company-specific, as the market discovers which companies have been well placed and We are mindful that although a clearer picture is slowly which have not – and to what degree the latter have been emerging, there is still a great deal of risk and uncertainty. As a affected. There will be a high degree of differentiation between result, we continue to have different kinds of positions in the – and within – industries. This environment plays to our portfolio. Hence we have companies which are leveraged to strengths. lifting of restrictions and recovery in economic activity, such as

For more information please call 1800 813 886, contact your key account manager or visit pendalgroup.com

This factsheet has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and the information contained within is current as at the date of this factsheet. It is not to be published, or otherwise made available to any person other than the party to whom it is provided. PFSL is the responsible entity and issuer of units in the Pendal MidCap Fund (Fund) ARSN: 130 466 581. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1800 813 886 or visiting www.pendalgroup.com. You should obtain and consider the PDS before deciding whether to acquire, continue to hold or dispose of units in the Fund. An investment in the Fund is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. This factsheet is for general information purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information in this factsheet may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information in this factsheet is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information. Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Where performance returns are quoted "Post fees" then this assumes reinvestment of distributions and is calculated using exit prices which take into account management costs but not tax you may pay as an investor. Where performance returns are quoted "Pre fees and tax", they exclude the effects of management costs and any taxes. Past performance is not a reliable indicator of future performance. If market movements, cash flows or changes in the nature of an investment (e.g. a change in credit rating) cause the Fund to exceed any of the investment ranges or limits specified, this will be rectified by PFSL as soon as reasonably practicable after becoming aware of it. If PFSL does so, it will have no other obligations in relation to these circumstances. The procedures, investment ranges, benchmarks and limits specified are accurate as at the date of this factsheet and PFSL reserves the right to vary these from time to time. Pendal MidCap Index (the “Index”) is the property of Pendal Fund Services Limited (PFSL), which has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain the Index. The Index is not sponsored by S&P Dow Jones Indices or its affiliates or its third party licensors (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices will not be liable for any errors or omissions in calculating the Index. “Calculated by S&P Dow Jones Indices” and the related stylized mark(s) are service marks of S&P Dow Jones Indices and have been licensed for use by PFSL. S&P® is a registered trademark of Standard & Poor's Financial Services LLC (“SPFS"), and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”).