The Pengana Australian Market Neutral Fund Class A (“Fund”) aims to provide a net return of 5-10% p.a. over cash, with a risk target of 8-10%¹. The Fund holds equal weights in long and short positions in stocks listed on the ASX, with a majority of the stocks included in the S&P/ASX 300 Index.

The Manager’s investment approach is premised on the belief that fundamental factors (such as earnings, cash flow and profit growth) affect stock prices, but that the adoption of quantitative techniques (i.e. computer based models) provides an advantage in assimilating and analysing this information, and building an efficient portfolio.

The Manager employs these models to aggregate and assess company information, which is then integrated with the fundamental equity analysis within the Manager’s experienced equity team. It seeks consistent returns through the systematic capture, measurement and implementation of investment insight.

The Fund’s portfolio is constructed to be Market Neutral i.e it aims to have little or no overall exposure to movements in the equity market. The aim of low exposure to market movements is to enhance the consistency of the portfolio’s performance and to provide diversification from other market oriented investments.

Performance

Accumulated Fund and Comparative Benchmark Performance Since Inception to end April 2012

• Pengana Australian Equities Market Neutral Fund Class A
• RBA Cash Rate

Fund Performance - Net of all Fees and Expenses as at end April 2012

Investment Strategy

The Manager employs a fundamentally based quantitative investment approach to stock selection. Stocks are scored across 7 main investment themes: value, earnings, cashflows, profit growth, momentum, liquidity and behavioural. The Manager considers that these 7 main investment themes are the aggregation of many underlying company fundamentals that have been shown to explain share price behaviour.

The Manager’s fund management team use proprietary computer based models to score the stocks based on information derived from an entity’s balance sheet, income statement and cash flow analysis combined with independent analyst research, earnings forecasts and price momentum. Stocks are then weighted into an optimal portfolio using a stock’s aggregate score and contribution to portfolio risk.

The portfolio construction process attempts to control risk by maintaining neutral exposures to:

• Relative market movements (position size and market exposure constrained)
• Sector exposures (limits are placed on the net weight in each sector)
• Size bias (reduces the effect of large cap versus small cap performance)

By reducing these exposures, market neutral investing becomes a pure stock selection model that derives returns from company specific factors. As there is limited market exposure, the Fund’s relevant performance benchmark is the RBA Cash Rate.

In order to achieve market neutrality, the Fund may invest “long” (the purchase of securities which the Investment Manager believes will appreciate in value) and “short” (the sale of securities which the Investment Manager believes will depreciate in value). The Fund may also employ leverage up to a maximum of 400% of the Net Asset Value of the Fund.

Fund Managers

	Phillip Boustridge - Director of Portfolio Management & Strategy Phillip has over 18 years of investment experience in funds management and has actively managed equity portfolios in Australia, London and New Zealand. Phillip joined Pengana towards the end of 2007 to develop a fundamental quantitative investment process for the Australian market and is currently managing an Australian market neutral investment fund as part of Pengana’s strategy of actively building research and systems capability for market neutral strategies across the Asian Region. Phillip’s previous experience includes the management of a large UK equity portfolio at BGI in London using BGI’s quantitative investment process. At Sabre Funds Management, a small boutique hedge fund manager in the London West End, he also developed and refined alpha and portfolio construction techniques that were actively managed alongside long-short and market neutral portfolios. Phillip has a Masters Degree in Finance with honours and held a lecturing position in Finance and Banking at Massey University New Zealand.
	Miriam Herold - Portfolio Manager Miriam has over 11 years of investment experience in funds management and has particular responsibility for implementing the Fund’s investment strategy with Phillip . Miriam joined Pengana in May 2010. She has worked for institutional investment firms in the UK and Australia and was most recently Senior Performance Analyst with JP Morgan in Sydney. Miriam’s previous experience includes equity research analysis with CommSec (covering the financials sector), equity research analysis with Dresdner Kleinwort Investment Bank in London (covering the healthcare sector), quantitative analysis and performance analysis with Henderson Global Investors in London and Sydney. Miriam graduated from Sydney University in 2000 with a degree in Economics, majors in economics and econometrics.
	Paul Ramsay - Systems Director Paul brings more than 21 years of expertise in computer systems engineering to the investment management team in both software architecture and hardware design and build. Paul has designed and built relational database management systems for networked architectures in demanding environments. Paul has owned and operated two technology companies that developed innovative solutions for business. Using his extensive experience in electronics engineering Paul builds state-of-the-art computer systems to run the quantitative modelling and back-testing facilities.
	Martin Young - Research Director Martin is a Professor in Finance who has worked at both Massey University in New Zealand and Nanyang Technological University in Singapore. He is also an appointed Guest Professor of Xiamen University in China. He is the Vice-President of the Asian Finance Association, and the New Zealand representative on the Asian Shadow Financial Regulatory Committee. He serves on a number of editorial boards including the editorial board of the practitioner-based Journal of Applied Finance. He has published over thirty academic works, primarily in the area of asset pricing in Asian and Australasian markets. As well as his academic experience, Martin has been involved in the financial markets industry in New Zealand and was a member of the New Zealand Stock Exchange for many years.
	Bernard Lo - Research & Systems Analyst Bernard has 5 years of investment experience in funds management. Prior to joining Pengana Bernard worked as a computer programmer and as a technician solving computer software and hardware problems. Leveraging his prior experience in software engineering, Bernard constructs applications to run quantitative models. Bernard is currently in his final year of his Bachelor of Commerce (Finance) and Bachelor of Laws degree.

Australian Financial Review, 18/04/12 – Shift to Neutral Fires Up Funds

Money Management, 19/01/12 – Market Neutral Funds Underated: Zenith

Financial Standard, 05/10/10 – Pengana Launches Australian Market Neutral

Super Review, 23/09/10 – Pengana Opens Market Neutral Fund for Wholesale Clients

Investor Daily, 26/07/10 – Travelling Through the Hedge Fund Maze

Investor Daily, 01/06/10 – Pengana Launches Market Neutral Fund

Financial Review, 18/04/2012 – Shift to Neutral Fires Up Funds

Reports

Unit Prices

Pengana Australian Equities Market Neutral Fund Class A

Ratings and Independent Research

New Applications

1. Read the Financial Services Guide and then the current Product Disclosure Statement (PDS):

• Financial Services Guide
• Product Disclosure Statement

2. Complete the Application Form found in the PDS (choose from the list below)

• Application Form for Individuals and Sole Traders refer to pages 34-38
• Application Form for Australian Trusts and Self Managed Superannuation Funds refer to pages 39-49
• Application Form for Australian and New Zealand Companies refer to pages 50-57
• Application Form for Partnerships, Registered Co-operatives and Government Bodies refer to pages 58-64

3. Send the completed Application Form and required Anti Money Laundering (AML) identification document(s) to the Administrator:

BNP Securities Services
PO Box R209
Royal Exchange NSW, 1225
Attention: Unit Registry,
Pengana Australian Equities Market Neutral Fund

Due to AML legislative requirements, we cannot accept an ‘Application Form for New Investment’ by facsimile or email.

4. Transfer Funds

Transfer your application monies:

• Cheques – payable to:
  “Cogent Nominees Pty Limited ACF Pengana Australian Equities Market Neutral Fund Applications Account”

• EFT or Direct Deposit:
  
  Acct name: Cogent Nominees Pty Limited ACF Pengana Australian Equities Market Neutral Fund Applications Account
  Bank: Westpac Banking Corporation
  BSB: 032002
  Acct number: 639162

In addition, if you are paying the application monies by EFT or direct deposit you must ensure your investor name is recorded as a narrative on the payment.

You need to provide your completed application form, AML identification documents and cleared application monies to us prior to the processing cut-off time, that is, by 2pm Australian eastern standard time on a Business Day. Applications received after 2pm Australian Eastern standard time will be allocated units at a price as at close of business of the next Business Day after the application has been received.