Benefits of investing in the Smallco Broadcap Fund

The Manager's aim is to achieve 5% p.a. above the S&P/ASX 300 Accumulation Index after fees on a rolling three year basis, although returns are not guaranteed.

It is the aim of the Manager that high compound returns will come mostly from capital appreciation which will be reflected in the unit price, but net realised profits, if they occur, will be distributed annually shortly after 30 June of each year. These distributions may carry imputation tax credits. The Fund is generally not taxed itself, but investors will usually be taxed on the realised gains they make from the Fund. It is important that investors seek their own professional advice, including advice regarding tax.

Under normal circumstances you can redeem all or part of your investment daily subject to a minimum withdrawal amount of $5,000 and a minimum holding balance of $40,000.

Risk level

High

Investor suitability

The Fund is designed for investors who can tolerate a high level of risk and invest in the Fund as one part of a diversified portfolio of investments.

The Smallco Broadcap Fund is a concentrated Australian Equities fund that provides a broader exposure to the Australian equity market than the Smallco Investment Fund.

Its key features are as follows:

• A true broadcap fund - SBF can invest up to 40% in companies with less than $1bn in market capitalisation and will typically be between 25-40% invested in these companies.

• Smallco will limit the number of investors in the Fund when necessary to protect the Fund's ability to invest a significant component of its assets in companies less than $1bn in market capitalisation. It will continue to manage capacity and limit inflows using its power under the Fund's constitution to reject applications at its discretion.

• Stock weightings are determined by our assessment of the quality of the stock, the likely investment outcome and the risk of sustained capital loss and liquidity.

• An industrials bias. SBF will often be underweight resources stocks given they fit poorly with the manager's strong bottom up focus on forecasting a company's earnings and the risk to these forecasts.

• A willingness to realise investments when target prices are reached and hold cash when sufficient attractive investment opportunities are not identified. It is not unusual for the cash weighting to hit 20% until attractive replacement opportunities are found. SBF is at times quite actively managed.

• SBF is able to hold up to 50% of its assets in cash if appropriate investment opportunities are not able to be identified or market risks are deemed too high.

How we invest your money

Investment style and process

• Style neutral, employing a mix of both bottom up and top down analysis and a strong focus on earnings direction and risks.

• Smallco employs elements of both growth and value styles in the management of SBF, seeking to overlay a core of reasonably priced quality long-term growth stocks with, when they can be found, attractive value ideas where we believe a re-rating trigger is likely within 6-12 months.

• Smallco selects stocks based on a research-driven bottom up style which forms the core of our process. Additionally, top down analysis is employed moderately as both a feedback loop to our bottom up work and to identify parts of the market in which to concentrate our bottom up work.

• Labour standards and environmental, social and ethical considerations are not specifically taken into account in the selection, retention and realisation of investments relating to the Fund.

• We can change our investment strategy and style in the future. We will notify you if we propose to do so.