Benefits of investing in the Investors Mutual Equity Income Fund

The Fund provides Australian and New Zealand investors access to Australian securities. The Fund aims to provide regular income, including tax effective income, and some capital growth.

Investing in the Fund offers you a range of benefits:

• your money is managed by IML's investment professionals who have access to investment techniques that may not be available to all investors;

• access to investment opportunities and markets that may not be accessible to all investors;

• unless the Fund has become illiquid, you can generally apply to withdraw your investment on any Business Day; and

• fund managers can usually transact at a lower cost than individual investors.

Risk level

Medium to High

About the Fund

The Investors Mutual Equity Income Fund provides exposure to a diversified portfolio of quality ASX listed shares. The Fund aims to provide a regular and relatively high income stream with lower levels of volatility relative to the S&P/ASX 300 Accumulation Index and some capital growth to investors. The Fund applies IML's conservative value based investment philosophy with a long term focus and aims to deliver consistent returns to clients.

Investment return objective

The fund's dual objectives are to provide a dividend yield (after fees and expenses and before taxes) which exceeds a yield of 2% above that of the S&P/ASX 300 Accumulation Index on a rolling four year basis, whilst maintaining lower levels of volatility relative to the S&P/ASX 300 Accumulation index.

Investment philosophy

IML's investment philosophy is based on a belief that a company's share price will reflect its underlying value in the long-term. We believe that markets are not fully efficient and there will be times that a company's share price will not reflect what we believe to be that company's true value. Such situations provide our investment team with the opportunity to build long term portfolio positions in quality companies at attractive valuations.

We are looking to invest in companies with four clear quality characteristics:

1. competitive advantage
2. recurring earnings
3. capable management
4. the ability to grow over time

How we invest your money

As a guideline, the Fund will usually hold a minimum of 20 different securities. The main investments of the Fund may include a combination of:

• securities listed on the ASX. This may include companies with operations outside Australia (including dual listed entities) but listed on the ASX;
• cash (and cash equivalents such as other investment grade interest-bearing securities);
• derivatives (bought and sold options), as described below; and
• Hybrid securities listed on the ASX.

IML may use options, futures and other derivatives to manage risk, to gain exposure to particular securities and markets or to enhance the returns of the underlying physical investments. Derivatives are not used speculatively or for the purposes of gearing the Fund. The Fund will not borrow.

Our Investment style

IML has an active, "bottom-up approach to identifying, researching and valuing quality companies. Our approach is systematic, disciplined and focuses on finding companies that meet our quality criteria and then determining an appropriate valuation for those companies.

We believe that the underlying value of a company is best determined by quantifying and valuing the sustainability, quality and growth potential of a company's future earnings stream. The earnings stream from a company is important to us because it enables both the payment of dividends to shareholders and the reinvestment into the business for future growth.

IML conducts detailed in-house research and valuation as part of its overall investment process. Individual investments across all allowable asset classes are selected based upon our opinion of their ability to fulfil all or part of the objectives of the Fund. As such, we seek investments that we believe offer one or more of the following characteristics:

• provide an absolute real return over the long-term to investors;
• will pay a regular income stream; and
• are less volatile (risky) than the market in which they trade and therefore should minimise the impact of a falling market on the value of your investment.

As markets move through different cycles some asset classes will be more attractive in their ability to deliver on the objectives of the Fund. The overall makeup of the investments of the Fund will therefore change from time to time to reflect this relative valuation. This is the approach we will adopt in order to manage the asset allocation of the Fund.

Asset classes and allocation ranges

• Cash: 0-50%

• Australian Equities: 50-100%