Capital investing

Our capital style looks for companies that manage their capital effectively in order to generate strong growth year after year. Our aim is to find companies that are leaders in their industry, with a competitive and sustainable advantage, that generate strong free cash flow and are able to re-invest this at a higher rate than their cost of capital.Companies are assessed on four main criteria:

1. Financial characteristics - the focus here is on the company’s ability to generate both returns above its cost of capital and sustainable free cash flow.
2. Industry structure - the ability to achieve superior returns in some businesses is better than in others.
3. Competitive advantage - the sustainability of a company’s competitive advantage is critical to our screening process.
4. Quality of management - we seek out companies whose management place a strong emphasis on return on capital
   and enhancing returns for shareholders.

All these factors are brought together and reviewed before stocks are finally ranked top to bottom - our ‘Great Stocks’
list. A valuations model is then created using a multi-factor quantitative model which focuses on capital management and cash flow valuations rather than reported profits.

In bringing the Great Stocks and their Valuations together, we seek to construct a portfolio with the best qualitative characteristics assessed for an acceptable valuation, subject to tracking error constraints.

Investment options

Equity Fund Date of inception June 2000 Investment strategy Applies the capital style to investing in companies listed on the Australian Stock Exchange. Objective To provide high returns over the long term while accepting high volatility. Performance benchmark S&P ASX 200 Accumulation Index. Suggest investment time frame 5 to 7 years Level of risk High

Small Companies Fund Date of inception May 2000 Investment strategy Applies a capital style to investing in companies listed outside the top 50 (by size) on the Australian Stock Exchange. Objective To provide long term capital growth. Performance benchmark S&P ASX Small Ordinaries Accumulation Index Suggest investment time frame 5 to 7 years Level of risk High