Platinum Investment Management : ASX Preliminary Final Report (Appendix 4E) 30/06/2020

Appendix 4E

Preliminary final report

Listing Rule 4.3A

Company	Platinum Asset Management Limited
ASX Code	PTM
Year Ended	30 June 2020
Previous corresponding period - Year Ended	30 June 2019
ABN	13 050 064 287
Results for Announcement to the Market

This announcement to the market for the Platinum Asset Management Limited Consolidated Group should be read in conjunction with the attached 30 June 2020 Annual Financial Report.

	% decrease	$A'000
Total revenue and other income	-0.2%	298,666
Profit from ordinary activities after income tax	-1.7%	155,611
Net profit attributable to members	-1.3%	155,611
Basic and diluted EPS (cents per share)		26.76 cps

Funds Under Management ("FUM") at 30 June 2020 were $21.4 billion and this represented a decrease of 13.7% from the 30 June 2019 closing FUM of $24.8 billion. The closing FUM figure at 30 June 2020 was reduced by the annual net distribution outflow of $532 million. Average FUM for the year decreased by 6.3% to $23.7 billion from an average FUM of $25.3 billion for the previous year. The reduction in FUM was driven by net fund outflows of $3.0 billion. Absolute investment returns contributed $0.2 billion to the FUM during the financial year.

Total revenue and other income was $298.7 million for the year ended 30 June 2020, a 0.2% decrease from $299.3 million in the prior year. Management fee revenues decreased 6.5% compared to the prior year due to the decrease in average FUM over the same period. Performance fee revenues of $9.1 million (2019: $30,000) were primarily attributable to strong relative performance by the Asia ex Japan and Healthcare strategies. Other income increased from $4.1 million in the previous year to $13.7 million in the current year due to improved returns from seed investments

Total costs were $77.9 million for the year ended 30 June 2020, an increase of $1.5 million from the prior year. Costs decreases included staff costs (down $1.5 million) and custody and unit registry fees (down $1.5 million). However, these were offset by occupancy related expenses (up $1.8 million due to office fit-out costs and changes to lease accounting rules) and share-based payments expense (up $1.9 million due to an additional grant in 2020).

Refer to the attached audited financial statements for more financial information on the Consolidated Group results.

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

Telephone [phone] | Investor Services 1300 726 700 | Facsimile 61 2 9254 5590 | Email [e-mail] | Website www.platinum.com.au Platinum Asset Management Limited ABN 13 050 064 287

Dividends
Final dividend declared	11 cents per share fully-franked
Ex-dividend date	3	September 2020
Record date	4	September 2020
Payable date	22	September 2019

The interim dividend paid for the half-year ended 31 December 2019 was 13 cents per share fully- franked.

Dividend Reinvestment Plan

Whilst the Company has a Dividend Reinvestment Plan in place, it has not been activated.

Other Information

Net tangible assets per share of the consolidated entity attributable to owners was $0.54 at 30 June 2020 as compared to $0.55 at 30 June 2019.

Joanne Jefferies

Company Secretary

26 August 2020

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Platinum Asset Management Limited ("PTM" or "Company")

Chairman's Report 2020

Funds under Management ("FUM")

It has been a somewhat challenging year for Platinum Asset Management Limited ("Platinum") with investment returns for our flagship Platinum International Fund overshadowing some strong investment performance in other areas, most notably our Asia ex-Japan and International Health Care focused strategies. This underperformance in the flagship fund translated into net fund outflows and lower funds under management, albeit that overall revenues were flat for the year and profit after tax was down only slightly, by 2%, when compared to the prior period.

FUM at 30 June 2020 was $21.4 billion, a decrease of 14% from the 30 June 2019 closing FUM of $24.8 billion. The reduction in FUM was driven primarily by net fund outflows of $3.0 billion.

Average FUM for the year decreased by 6% to $23.7 billion from an average FUM of $25.3 billion for the previous year.

The ongoing uncertainty in relation to the US/China trade war and bleaker prospects for future economic growth caused by the COVID-19 pandemic has led investors in global equity markets to remain nervous, even as those markets have continued to appreciate in value. Investors once again reacted to their fears by favouring companies perceived to be immune from external events, with technology and healthcare stocks in particular being propelled to extraordinarily high valuations relative to their future earnings prospects. In contrast, value stocks and/or those with a degree of earnings cyclicality were avoided by the majority of investors, and those stocks generally became cheaper.

Platinum has always believed that attractive valuations should be the starting point for any investment decision. This growing divergence between growth and perceived safety on the one hand and attractive valuations on the other, has consequently led to some investment underperformance for Platinum's funds in recent years. That said, it was encouraging to see how Platinum's investment approach successfully protected investor capital during the tumultuous market sell-off in March 2020. From peak to trough1, the Platinum International Fund outperformed the index2 by over 8% with our investors consequently avoiding a substantial portion of the losses experienced by the broader market. Even though this strong result was ultimately overshadowed by an unusually sharp subsequent rally (by historical standards) in equity prices, it was pleasing to observe that Platinum's investment process, one that seeks to protect clients in "down markets", performed well when our clients were likely at their most fearful.

Also pleasing to observe was the strong performance of Platinum's Asia ex-Japan and International Health Care equity strategies, both of which outperformed their respective indices3 by over 10% in the year to 30 June 2020. As well as serving clients who were invested in these funds, it is important to remember that, as Platinum has just one investment research team, these results provide encouraging signs of the underlying quality of Platinum's investment process and equity research capabilities.

• From 21 February to 23 March 2020.

• MSCI All Country World Net Index in A$. Source FactSet Research Systems.

• MSCI All Country Asia ex-Japan Net Index in A$ and MSCI All Country World Health Care Net Index in A$.

Fund/strategy returns are the returns of the C Class units of the relevant Platinum Trust Fund, are net of fees and costs and assume the reinvestment of distributions. Source: Platinum for fund/strategy returns, and FactSet Research Systems for index returns.

Past performance is not a reliable indicator of future returns.

Platinum Asset Management Limited

Chairman's Report 2020 - continued

Operating Performance

Profit before tax decreased by 1% to $220.8 million in the year ended 30 June 2020 (2019: $222.9 million). Earnings per share for the 2020 financial year was also relatively flat at 27 cents per share (2019: 27 cents).

Total revenue and other income for the Company decreased by less than 1% to $298.7 million in the year ended 30 June 2020 (2019: $299.3 million). This slight decline was mainly due to a 7% fall in base fee revenue being offset by performance fees (primarily from the Asia ex-Japan strategy) and investment gains from Platinum's seed investments. The decline in investment management fees (excluding performance fees) was broadly consistent with the decline in average FUM with average fee margins being largely maintained.

Costs

Included in the 2020 Remuneration Report on page 12 of the Company's 2020 Annual Report is a letter from the Chair of the Nomination and Remuneration Committee. I encourage all shareholders to read this letter, which outlines the remuneration policy of the Company and also its focus on investment performance based remuneration.

Specifically, I note that no member of the investment team received variable awards under the Profit Share Plan and that the Chief Executive Officer (CEO)/Chief Investment Officer (CIO), Andrew Clifford, elected not to receive any variable awards for the 2020 financial year, either under the CEO Plan or the Investment Team Plan. This is the second consecutive year in which Andrew Clifford has received no variable award.

Staff expenses declined 4% on the prior year, a reduction greater than the overall percentage fall in profit. However, the cost of share-based payments provided to staff increased by $1.9 million. This was primarily due to the current financial year including amortisation of grants made over the past five years (2019 only included four years as the plan was introduced in 2016). This was the main contributor to total expenses increasing by $1.5 million, to $77.9 million, for the year to June 2020.

Other costs were well controlled. Excluding non-cash depreciation charges and non-recurring expenditure (legal fees and a change to the lease accounting standard) of $1.1 million (2019: $0 million) in the 2020 financial year, non-staff related expenses were down 4% year on year. To achieve this result, Platinum successfully re-negotiated cost savings with its key suppliers and reduced marketing spend, albeit that some of the latter item was the result of COVID-19-induced reductions in marketing activity.

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