Platinum Capital : March 2022 Quarterly Investment Manager's Report

21 April 2022

The Manager

ASX Market Announcements Australian Securities Exchange Limited Sydney NSW 2000

By e-Lodgement

Quarterly Investment Manager's Report

The 31 March 2022 quarterly investment manager's report is attached to this announcement. For more information in relation to Platinum Capital Limited please refer to the website at:

www.platinum.com.au/Our-Products/All-Products/Platinum-Capital-Limited

Authorised by

Joanne Jefferies | Company Secretary

Investor contact

Elizabeth Norman | Director of Investor Services and Communications Platinum Investment Management Limited

Tel: 61 2 9255 7500

Fax: 61 2 9254 5555

Level 8, 7 Macquarie Place, Sydney NSW 2000, Australia | GPO Box 2724, Sydney NSW 2001

Telephone 61 2 9255 7500 | Investor Services 1300 726 700 | Facsimile 61 2 9254 5555 | Emailinvest@platinum.com.au| Website www.platinumcapital.com.au

Platinum Capital Limited ABN 51 063 975 431

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Investment Update

by Andrew Clifford, Clay Smolinski and Nik Dvornak, Portfolio Managers

Performance

(compound p.a.* to 31 March 2022)

SINCEQUARTER

1 YR

3 YRS

5 YRS INCEPTION

PMC's returns are calculated using PMC's pre-tax net tangible asset (NTA) backing per share as released to the ASX monthly. PMC's returns are calculated after the deduction of fees and expenses, have been adjusted for taxes paid and any capital flows, and assume the reinvestment of dividends.

PMC's returns are not calculated using PMC's share price.

Portfolio inception date: 29 June 1994.

* Excluding quarterly returns.

^ Index returns are those of the MSCI All Country World Net Index in AUD. Historical performance is not a reliable indicator of future performance. Source: Platinum Investment Management Limited for PMC's returns; FactSet Research Systems for MSCI Index returns. See note 1, page 11.

Net Tangible Assets

The following net tangible asset backing per share (NTA) figures of Platinum Capital Limited (PMC) are, respectively, before and after provision for tax on both realised and unrealised income and capital gains.

In Brief:

• • Russia's invasion of Ukraine and the implication for energy and food prices was the focus for investors over the quarter. China's role in the conflict, specifically its "partnership" with Russia, as well as the re-emergence of COVID were also a concern. The uncertainty prompted investors to flock back to the 'safety' of growth stocks post the invasion.

• • Commodity producers (Glencore, Mosaic) were strong performers for PMC over the quarter. Our short positions also made a positive contribution. European banks (Raiffeisen Bank particularly), Chinese stocks (Weichai Power, ZTO, Tencent) and industrials (MinebeaMitsumi, Lixil) detracted.

• • We trimmed stocks that had performed well (Mosaic, China Overseas Land & Investments, AIA) and increased our exposure to energy (adding new positions in Shell and Suncor Energy) and Europe, notably in travel (with a new position in Wizz Air) and banks (adding to Intesa Sanpaola, Erste Bank, Barclays), which were trading at exceptionally low valuations.

• • PMC continues to maintain a conservative net invested position (65%), reflecting our concerns about interest rates, inflation and the deteriorating geopolitical environment.

• • The portfolio's investments (longs) predominantly comprise profitable businesses, though with some degree of cyclicality, trading at attractive valuations. The portfolio also holds short positions in market indices as well as the popular and expensive growth companies. While growth stocks have offered a place to hide for investors in recent weeks, our assessment is that the highly speculative growth stocks still have considerable downside.

QUARTERLY INVESTMENT MANAGER'S REPORT

31 MARCH 2022

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PMC returned -7.6% for the quarter, marginally ahead of the market's -8.4% return.1

The performance within markets differed dramatically over the course of the quarter. In the period prior to Russia's invasion of Ukraine, the market fell -8.6%. This period was marked by rising interest rate expectations as the global economy continued its post-pandemic recovery. During these initial weeks of the quarter, expensive growth stocks performed poorly. Post the invasion, stocks that were poised to benefit from the economic recovery, such as cyclicals, travel stocks and European banks, experienced significant price falls, as did Chinese companies, reflecting concerns about geopolitical risk and the struggling Chinese economy as it faced a new wave of COVID-19 infections. Investors once again favoured the growth names, with the growth-heavy US Nasdaq 100 Index finishing up 10% over this period.

Strong performers for PMC over the quarter were our investments in commodity producers. Of note was Glencore (+33%), which benefited from broadly higher commodity prices for its mining activities and the dislocation in commodity markets, providing opportunities for its trading arm. Mosaic (+69%) benefited from higher potash and phosphate prices due to concerns regarding Russian/Belarus supplies of these important fertiliser products. PMC did not have any investments in Russian stocks.

The largest detractor from performance was Raiffeisen Bank International (-50%), an Austrian bank which has major banking positions across Central and Eastern Europe (CEE). Other major detractors from performance were our Chinese holdings, notably Weichai Power (-19%), Tencent (-16%) and ZTO Express (-11%), where the market experienced a broad and indiscriminate sell-off as a result of concerns around China's partnership with Russia. Concerns that the US regulator, the Securities and Exchange Commission, would move to delist Chinese stocks from US stock exchanges exacerbated the market's weakness. Japanese industrial stocks MinebeaMitsumi (-17%) and Lixil (-25%) also detracted, reflecting supply chain and input cost issues following the strong rises in commodity prices.

Contributions from short positions, which are concentrated in the expensive growth stocks, also followed the rotation within the markets, adding significantly to PMC's performance in the early weeks of the quarter, and then detracting as the markets rebounded during March. Overall, our short positions contributed 1% to performance over the quarter.

Disposition of Assets

Net Sector Exposures

Top 10 Holdings

South Korea Info Technology China IndustrialsChina China US FinlandFinancials Real Estate Materials Materials

Source: Platinum Investment Management Limited.

1 References to returns and performance contributions (excluding individual stock returns) in this Platinum Capital Limited report are in AUD terms. Individual stock returns are quoted in local currency terms and sourced from FactSet Research Systems, unless otherwise specified.

For further details of PMC's invested positions, including country and industry breakdowns and currency exposure, updated monthly, please visitwww.platinumcapital.com.au.

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Changes to the Portfolio

The portfolio's net invested position was reduced over the course of the quarter from 68% to 65%. The decrease in the net invested position reflects an increase in short positions from 22% to 28% and a reduction in cash from 10% to 7%. The shorts consist of market indices (14%), individual stocks (12%) predominantly in very highly valued growth names, and baskets of expensive growth stocks in the clean energy sector (2%). The cautious positioning reflects our concerns about interest rates and inflation, and the deteriorating geopolitical environment.

New holdings for the portfolio included energy producers Shell and Suncor Energy (Canadian oil producer and refiner). As outlined below, energy markets were already tight prior to Russia's invasion of Ukraine, and it is now likely that the world will experience elevated energy prices for an extended period. While stock prices of energy companies have risen, broadly they are not reflecting this longer-term outlook.

In Europe, we bought a number of stocks that were impacted by concerns regarding European economic growth. These included a new holding in Wizz Air, a fast-growing low-cost carrier, that returned to valuations approaching those reached in the COVID-19 sell-off in March 2020. We also increased our holdings in European banks Intesa Sanpaolo (Italy), Barclays (UK) and Erste Bank (Eastern Europe).

A number of stocks that had performed well during the period were trimmed, including Mosaic (fertilisers) and China Overseas Land & Investments (Chinese residential property developer). AIA (Asian insurance) was exited.

Commentary

Russia's invasion of Ukraine and the implications for markets has been the focus of attention for investors in recent weeks. Not only is the world facing higher energy and food prices as a result of the conflict, there is the possibility of outright shortages of these commodities, potentially creating serious humanitarian as well as economic issues globally. There have also been concerns regarding China's role in the conflict and the potential for sanctions on China if they were seen to be aiding Moscow either militarily or in avoiding sanctions. Meanwhile, China is dealing with the re-emergence of COVID-19 at a time when the economy is facing its most severe slowdown since its reopening, as a result of the common prosperity reforms introduced during 2021. We will address each of these issues, but before doing so, it is important to understand the economic and market context in which these events are occurring.

Prior to the invasion of Ukraine, inflation and interest rates were the key issues. Inflation in much of the developed world was continuing to rise, reaching levels not seen since the early 1980s. While inflation had been rising throughout the second half of 2021, tight labour markets and commodity markets, ahead of a full reopening of economies post the COVID-19 pandemic, made it clear that it would not fade away as matter of course. The result was a clear change in expectations for the future course of interest rates, most notably in the US where 2-year Treasury yields rose from 0.73% to 2.29% over the quarter. It was not that long ago that increases in interest rates were not expected until 2024. The US economy continued to show strong momentum through the quarter and inflationary pressures have been exacerbated by the conflict. As a result, the Federal Open Market Committee (FOMC) affirmed at their March meeting that they expected numerous interest rate increases to occur over the course of 2022.

One now has to overlay this backdrop of inflation and rising interest rates with a number of additional complications. Russia is responsible for approximately 10% of the world's oil production, of which approximately 75% is exported, and provides Europe with 34% of its oil imports.2 Russia is also responsible for supplying 40% of Europe's total gas consumption and around 18% of globally traded volumes of thermal coal.3 For the moment, Europe has not sanctioned purchases of Russian energy (though some private companies have stopped trading with Russia) and Russia has continued to supply oil and gas since the start of the conflict. However, this has occurred at a time when energy markets were already tight and prices were trending higher. In agricultural commodities, Russia and Ukraine provide significant volumes of globally traded wheat (29%), corn (19%) and sunflowers (33%).4 In fertiliser, Russia accounts for 20% of global potash supply and Belarus supplies a further 18%.5 Russia is also a significant supplier of other commodities such as steel, palladium, platinum, nickel, iron ore, copper and aluminium. Given that it is highly likely that Russia, short of a regime change, will remain a pariah state, it is also likely that energy and food prices will remain at elevated levels for a considerable period of time. The possibility of humanitarian crises in parts of the developing world is significant, and in the developed world, there will be pressure on household budgets, particularly for lower-income earners. And of course, headline inflation numbers are more likely to continue their upward trend.

• 2 Source: International Energy Agency (IEA).

• 3 Source: IEA.

• 4 Source: US Department of Agriculture, Morgan Stanley Research.

• 5 Source: ICIS, CRU consultants, Morgan Stanley Research.

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