Investment objectives and influences

(Click on link to jump to section) Investment objective Investor time horizon Asset allocation ranges  How investments will be held  Asset allocation process  Other investment considerations

The objective of the Third Link Growth Fund is to provide a diversified growth-oriented investment with a bias at most times to Australian listed shares. We aim to outperform the returns of the Morningstar Multi-Sector Growth Market Index after fees over rolling 5 year periods. This index is constructed by Morningstar from reviewing the asset allocation of Australian fund managers who operate multi-sector funds and have between 61 per cent and 80 per cent of their assets in growth sectors (typically defined as shares and property asset classes) with the balance in fixed interest securities and cash.

In order to achieve this objective, we have considerable flexibility in the type of investments the Fund may hold outside of Australian listed shares.

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Because of the normal volatility of growth assets, we are of the view that an investment in the Fund is not suitable for investors with a time horizon of less than five years.

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The broad investment ranges are:

The growth-oriented investments may include:
Australian listed shares/securities (0% - 100%)
International listed shares/securities (0% - 40%)
Unlisted investments (0% - 20%)

The fixed interest and cash portion of the portfolio may include domestic and/or international:
Government and semi-government bonds; and
Bank and other corporate debt securities including hybrid securities

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How investments will be held

It is expected that the majority of the Fund's assets will be invested in other managed investment funds run by third party investment managers (limited to a maximum of 25 per cent of the overall Fund value invested in any one managed investment fund). The process of choosing each investment manager is based on their investment style and process, the expertise of the investment team, past performance (through different market cycles), correlation issues and a range of other factors. This process is based on Chris Cuffe's extensive industry knowledge, considerable contacts and many years of experience in the investment management industry. To help with the selection process of fund managers, Chris may seek input from various advisers.

In the absence of changes in key personnel, management methodology or asset allocation, the Fund is likely to remain invested with a particular manager/fund for the medium to long term. Please click here for information on the various managers/funds that Third Link Growth Fund is invested with.

To better understand the type of share-based managed investment funds that the Fund will invest in, following is a list of different styles, and the Fund's investment preference.

A portion of the Fund may also be invested directly rather than through other managed investment funds. Such investments may include:

 materially undervalued listed investment companies (though liquidity will be a relevant consideration);
securities which complement the portfolio but which are not available through an acceptable managed investment fund structure;
securities that are judged to be better held directly to minimise fees, without compromising expected risk/return outcomes;
individual securities that appear materially undervalued and are judged to have sustainable, robust profits and cash flows (limited to 2 per cent each and 7.5 per cent in aggregate of the overall Fund value at the time of purchase); and
cash and fixed interest investments that are judged to be better held directly for administrative or other reasons.

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Chris Cuffe and his advisers meet twice per year (or more often as the need arises) to discuss/debate the domestic and international economic and investment environment, taking a view on the likely direction of various markets and asset sectors.

Chris then sets and adjusts as necessary the broad asset allocation of the Fund, with the key decisions being:

the split between growth-oriented investments and fixed interest/cash
the split of growth-oriented investments between various asset sectors and sub-sectors
the selection of managers and weightings to each

Under normal circumstances adjustments to the asset allocation of the fund are likely to be 'measured' rather than 'instantaneous'.

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Other investment considerations

Within the above framework, the investment strategy will be implemented having regard to the following:

the desire for the majority of investments to provide a consistent and robust income stream;
Third Link's belief that some investment markets are not perfectly efficient and that skilled 'active' investment management can exploit such inefficiencies;
Derivatives, including foreign exchange forward contracts, may be used by the Fund to more efficiently gain or reduce exposure to a market or security (compared to holding physical securities) or to protect the Fund investments from possible adverse events but will not be used speculatively ; and
the Fund will not borrow (either via bank loans or derivatives-based leverage in the Fund) except for short term arrangements for settling purchases of assets or meeting withdrawals

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Treasury Group Investment Services Limited (ABN 38 099 932 920 AFSL 227326) is the responsible entity of the Fund and does not guarantee the performance of the Fund, repayment of capital or any particular rate of capital or income return. Investors should obtain independent investment and/or tax advice from a licenced adviser as to the suitability of the Fund to their investment needs. Please click here for further information.