Benefits of investing in the Allan Gray Australia Stable Fund

Long-term returns aiming to exceed the Reserve Bank of Australia (RBA) cash rate

The Fund gives investors exposure to high quality cash and money market investments, with the added opportunity for exposure to the Australian sharemarket if opportunities exist. In this way, the Fund aims to provide stable long-term returns that exceed the RBA cash rate, but with less volatility than the Australian sharemarket.

A cautious approach

The Fund's default position is to have up to 100% of its investments in cash and money market instruments. Investments in the Australian sharemarket will only be made if Allan Gray identifies an investment opportunity that offers long-term value.

An alternative to money market and income generating investments

The Fund is an alternative to money market and income generating investments as it will seek some exposure to the Australian sharemarket if opportunities exist.

Access to the Allan Gray investment philosophy

When the Fund invests in equities, Allan Gray uses its investment philosophy to identify opportunities in the Australian share market.

Risk level

Low to Medium

Investor suitability

The Fund may be suitable for investors seeking stable long- term returns.

About the Fund

The Stable Fund is a more conservative investment that aims to outperform cash and boost your returns by blending cash with selected shares.

Outperforming cash without significantly increasing risk is the goal of many investors. The Stable Fund aims to answer this need.

Significant features of the Fund

By default, the Fund will invest 100% of its assets in cash and money market instruments.

Over time the Fund will include ASX-listed securities which Allan Gray believes will offer a significantly better total return than cash and money market instruments, and have some attributes that may limit their downside, such as tangible asset backing or high yields.

Allan Gray often comes across such investments in its analysis of shares for the Allan Gray Australia Equity Fund.

When sharemarkets fall to levels that Allan Gray believes offer compelling long-term value, the ASX-listed securities component of the Fund's assets could represent a maximum of 50% of the Fund's assets.

Allan Gray is often early when buying and selling securities, which means that the Fund may experience some fluctuations or volatility, especially if the sharemarket declines beyond its normal range. Allan Gray believes that these shorter-term fluctuations are unfortunately necessary to gain the upside when the sharemarket recovers.

Investment approach

• Contrarian - we take a contrarian approach to investing by resisting popular trends and uncovering opportunities in areas where nobody else is looking.

• Long-term - we take a long-term view. We are willing to look through short term noise and wait for an investment's value to be realised. In a competitive market, practicing patience can give you a distinct advantage.

• Fundamental - we concentrate on understanding an investment's intrinsic value, and the fundamentals that determine value, rather than trying to forecast the next price move.

How we invest your money

The Fund's default position will be investments in cash and money market instruments issued by, or with, entities that have at least an investment grade credit rating issued by Standard & Poor's or Moody's, such as large Australian banks. The only time the Fund will not invest in such cash and money market instruments is if Allan Gray identifies an investment opportunity that offers long-term value.

Such investments can only comprise up to 50% of the Fund's net asset value at any one time.

If Allan Gray cannot find such investments (typically in strong equity markets), the Fund will be fully invested in cash and money market instruments. Allan Gray identifies investments that offer long-term value based on their investment philosophy.

Asset allocation

Allan Gray will implement the above strategy by adhering to the following investment restrictions:

• Cash and money market instruments: 50% - 100%

These investments must have a term of maturity of less than, or equal to, 12 months, issued or guaranteed by the Australian Commonwealth or State Governments or one of the Big Four Australian Banks' - Westpac, Commonwealth, NAB and ANZ banks or their subsidiaries. Examples of such instruments are term deposits and short-term bonds (treasury bills). Also, no more than 50% of the Fund's net asset value shall be held with any one of these issuers.

• ASX securities: Nil - 50%

Included in this category are securities purchased pursuant to an initial public offering on the ASX. Also, no single ASX security can exceed 5% of the Fund's net asset value.

• Derivatives: Nil

The Fund will not purchase any derivatives. This does not preclude the Fund from investing in ASX-listed convertible instruments (being instruments that, at some point in the future, may convert into shares).

• Borrowing: Nil

There will be no gearing or borrowing in the Fund.