Whilst the core holdings of the OC Premium Small Companies Fund and the OC Dynamic Equity Funds will generally be the same, the OC Dynamic Fund will often take positions in smaller companies at an earlier stage of their development (our Emerging Leaders strategy) and may also make shorter-term investments. The OC Dynamic Equity Fund tends to have higher volatility than the OC Premium Small Companies Fund but with the potential for higher returns over the long term.

The exposure of the funds to our different strategies can be represented as follows:

For further information, see the OC Premium Equity Fund and OC Dynamic Equity Fund Product pages and fact sheets.

Whilst the OC Dynamic Equity Fund and the OC Concentrated Equity Funds invest using the same core strategies, the weighting between the strategies varies significantly. In addition the OC Concentrated Equity Fund may take larger positions in fewer stocks from the Core Fundamental strategy compared to the OC Dynamic Equity Fund. The OC Concentrated fund will have greater exposure to smaller companies at an earlier stage of their development (our Emerging Leaders strategy) and will also hold more shorter-term investments in the Alpha Plus strategy. Only the OC Concentrated Equity Fund may have short positions within the Alpha Plus strategy. The OC Concentrated Equity Fund tends to have higher volatility than the OC Dynamic Equity Fund but with the potential for higher returns over the long term. The OC Concentrated Equity Fund also tends to have higher portfolio turnover, primarily due to the greater exposure to the Alpha Plus strategy.

The exposure of the funds to our different strategies can be represented as follows:

For further information, see the OC Concentrated Equity Fund and OC Dynamic Equity Fund Product pages and fact sheets.

The aim of the Core Fundamental strategy is to purchase securities that we believe are trading below their intrinsic value and have sound long-term investment fundamentals. This maximises the potential to achieve strong and consistently positive investment returns over the long-term.

Our investment approach in the Core Fundamental strategy favours companies with:

• Strong management;
• a simple and transparent business model;
• a sustainable competitive advantage; and
• attractive valuation metrics based on our proven financial analysis and valuation techniques.

The Core Fundamental investment time horizon is generally a minimum of three to five years. However we will sell a security sooner if:

• something changes in the investment thesis and key assumptions are proven wrong;
• financial or operational expectations are not met;
• we are misled, or lose trust in management;
• if the stock price reaches our investment target;
• there is a better use
  of the capital.

While the Emerging Leaders strategy is similar to the Core Fundamental strategy, it differs in that the investments may be yet to reach our hurdles for operating history, size or liquidity. These investments are expected to have the attributes which will allow them to develop into appropriate candidates for the Core Fundamental strategy within their three to five year holding period. Once companies have developed sufficiently, they are moved to the Core Fundamental section of the portfolio.

The Alpha Plus strategy invests in catalyst driven positions that OC believe have strong near term return potential term but are unlikely to comprise core positions in the immediate future. Potential trading opportunities can include:

• Companies that we expect to win a major contract or tender
• Companies where there has been significant positive management change
• Companies that have made a value adding acquisition
• Discounted capital raisings (primary or secondary issuance)
• Takeover arbitrage
• Short term market opportunities
• Sub-underwriting opportunities (limited to stocks which we are happy to own in the other sections of the funds)
• Event arbitrage

The time frame for investments in the Alpha Plus section of the portfolio is typically much shorter than the other sections. While the holding period varies between strategies and between stocks, the targeted investment horizon is typically between a few days and a few months.

In the OC Concentrated Equity Fund, the Alpha Plus strategy can include up to three short positions with a maximum combined weighting of 15% for additional flexibility. Our philosophy dictates that only where we can see short term catalysts for negative price performance which are unexpected by the market, will we take a short position. We do not short stocks simply because we believe they are expensive, due to the inherently uncertain timing of any eventual de-rating. Additionally, we do not short stocks where we think they will only underperform another listed competitor (e.g. pairs trading), because we target absolute return it serves no purpose for us to off-set our conviction in this manner.

Long only means that the we seek to purchase stocks we believe will appreciate in the future and only selling shares which we own. The OC Premium Equity Fund and the OC Dynamic Equity Fund are long only funds and do not ‘short sell’ shares. Short-selling involves selling shares which have been borrowed (i.e. shares the funds don’t own) in the belief that the fund will be able to buy them back at a cheaper price at a later date to take advantage of falling prices. The OC Concentrated Equity Fund is a long-short fund and as such can engage in this technique, however our investment strategy dictates that short positions are only taken when we can see a catalyst for a share price falling in the near term. This is because the cost of borrowing stock can add-up over the longer term and individual stocks can remain expensive for an extended period where there is no catalyst for change.

Financial derivatives such as futures, warrants, swaps and forward rate agreements are not used at all in the running of the funds. Companies sometimes issue options to existing shareholders or in tandem with a share issue, in these rare circumstances, the funds may own options.

The Funds will only invest in securities that are listed or about to be listed on the Australian Stock Exchange as well as holding cash and short term deposits.

There are ways you can reduce your investment risk by:

• Obtaining professional advice. A professional independent adviser will help you ensure the investment decisions you make are appropriate bearing in mind your investment objectives, financial and personal situation, risk tolerance and level of investment experience.
• Investing for the recommended time frame. Higher risk investments such as shares exhibit less volatility when viewed over longer time periods. Consequently investing for a term of between 3 and 5 years gives you a better chance of enjoying a positive return.
• Managed Accounts clients should talk to their OC Portfolio Manager about the best strategy to employ in their OC Managed Account. Strategies can be adapted to the your desired risk appetite.

Given the long term investment philosophy and the volatility of the investment universe of the products, the recommended investment time frame is a minimum of 3 – 5 years. Managed Accounts clients with a shorter term time horizon should discuss this with their OC Portfolio Manager.

An OC Funds Management Individually Managed Account (IMA) is an investment vehicle similar to a managed fund, in which the client pays a fee to the manager for the provision of investment management services. The important difference is that a managed fund investor owns units with investors pooled in a trust that in turn owns the investments, whereas an IMA investor owns the invested assets directly in their own designated name. IMA’s are a highly effective personalised form of investment that combines the advantages of direct ownership with professional management of a portfolio across asset classes including direct shares, fixed interest and cash. for more information on our managed account offerings, please see our Managed Accounts page or contact us.

OC Managed Accounts also provide an Australian Equities Portfolio service to some financial planner groups, if you have invested in one of these investment options from your planner, please contact them in the first instance for more information about that product.

The minimum initial investment for an OC Managed Account is $500,000.

For OC Managed Accounts, investments are owned in the name of the entity you designate. Investments are not lent or pledged as security by us in any way. Some investments (for example investments in the OC Funds) may be held via a custodian, however this does not impact on your legal rights of ownership. Equity investments are held on a CHESS HIN in the name of your account or in rare circumstances as Issuer Sponsored holdings in the name of your account. Cash deposits are held in the name of your account with a major Australian bank.

Please see this page on how to invest with us.

Application forms should be sent to OC Funds Management, P.O. Box 572, Collins Street West, Melbourne, VIC 8007.

You can also drop off forms in person at our office.

The initial minimum investment for the OC funds is $20,000 and the minimum additional investment is $1,000 (unless using a savings plan which has a minimum additional investment of $500 per month).

You will have an investment in the relevant fund or funds in whatever name you have chosen on the application form. If you have invested via a platform or margin lending facility, the investment may be held via a custodian on your behalf. The investments within the funds are held by the funds custodian (National Nominees Limited, a wholly owned subsidiary of National Australia Bank) on behalf of the funds. The shares are not lent or pledged as security in any way. For the OC Concentrated Equity Fund, we lodge cash collateral with our prime broker to facilitate borrowing of stock to implement short trades.

Its important that you know exactly what’s happening with your investment. To help you keep informed we:

• Confirm every investment and withdrawal you make
• Send you a quarterly investment review with information on the companies we have visited, an overview of the stock market and a listing of investments held in the Funds’ portfolio
• Provide access to the secure Personal Portfolio service to show your up to date portfolio value and transaction listing for investments in the OC funds.
• Provide access to the secure BT Wrap web site to OC Managed Accounts clients to provide up to date portfolio valuations, holdings, transaction listings, tax reports and other information.
• Provide telephone services to give you the balance of your account and answer any questions you may have.
• Send you a copy of the annual accounts of the funds (if requested). Fund accounts are also available to download from their product pages.
• Provide distribution statements giving you an up to date balance of your investment and distribution entitlement.
• Provide annual periodic statements to investors in the OC Funds showing the transactions and distributions made by you during the year and the dollar value of fees paid by the fund attributable to your investment.
• Send you tax statements for your OC investments (for funds and for managed accounts)
• Send Managed Accounts clients quarterly reports including transaction listings and other information, prepared by BT Wrap.

For investments in OC Funds, you can use the Personal Protfolio site or if you prefer, multiply the unit price of the relevant fund by the number of units you own. The number of units you own will be shown on your most recent distribution or transaction statement.

For investments held in an OC Managed Account, the valuation is available from the BT Wrap web site (log-in required), posted quarterly in your quarterly report pack or available from OC on request.

Performance for the OC funds, displayed in the performance table, is calculated using the net asset value per unit for the given dates, adjusted for distributions paid over the period. Periods greater than one year show the compound annual performance. Performance is shown net of all fees but before any tax or refund of imputation credits which may be applicable to an investor. For further notes regarding performance calculation for the funds, please see the disclaimer on the performance page.

The funds are priced based on the net asset value of the underlying investments (after accruing for dividends receivable and fees payable) divided by the number of units outstanding. The difference between the net asset value per unit and the application and redemption prices is the buy/sell spread of 0.3%. This differential ensures existing or remaining investors in the fund are not penalised by the transaction costs incurred in investing additional capital from applications or liquidating investments to fund redemptions.

You may access your investments by filling in a redemption form. Once completed you can send it by post to OC Funds Management, P.O. Box 572, Collins Street West, Melbourne, VIC 8007 or fax directly to us on (03) 9642 0066. Note: All faxed withdrawal requests should be received by 2pm (AEST/AEDT) each day for processing that same day.

Redemptions from the OC funds are completed within 7 days in the normal course of business. The Responsible Entity may use its discretion in reducing or expanding the withdrawal periods. Due to the calculation of distributions, redemptions and applications often take longer to process after the funds go ex-distribution (i.e. early July and January), however the price used will be as at the date/time the redemption form is received.

Withdrawals from Managed Accounts can be made in cash or in specie (ie transfer out of the securities held in the account). This may avoid any tax consequence of withdrawing these investments (where there is no change in beneficial owner).

Distributions comprise your share of any income (i.e. dividends or interest received during the period from the investments within the fund) or realised net capital gains earned by the Fund in the period, net of the expenses of the fund (e.g. fees).

Income and expenses within Managed Accounts are paid to/from the cash component of the portfolio so external distributions are not paid unless requested.

The OC Premium Equity Fund distributes income half yearly.  The OC Dynamic Equity Fund and the OC Concentrated Equity Fund distribute annually.

• Automatically reinvested with no transactional costs payable. The additional units are purchased using the net asset value per unit applicable immediately after the distribution, or
• Directly credited to your nominated bank account.

You can nominate your choice on your application form or by completing a change of account details form. Your nominated distribution method will apply to all funds you invest in. If you do not make a choice, then your distributions will be automatically reinvested.

The unit price of a particular fund will fall by the amount of any distribution (per unit) immediately after the distribution is paid (i.e. once it is ex-distribution). If you invest just prior to a distribution then that distribution effectively represents a return of part of your initial investment. Depending on your circumstances this may have certain taxation implications and we recommend you speak with your financial adviser or tax adviser to determine your own situation.

During the time between the distribution ex date (the date at which holdings are determined for distribution entitlements) and the date when distributions are calculated and finalised, the unit price of a fund is quoted as bing “cum-distribution” or simply “CUM”. This means that the prive quoted includes the value of the distribution which is yet to be finalised. Trades carried out on these dates will be settled after the distribution has been finalised at the applicable ex-distribution price. For example, if you apply for units on 1 July and can see a CUM price for that date soon after, the actual price paid would be the EX price (lower by the amount of the distribution) but you would not receive the distribution either. Alternately, if you were to redeem units after the ex-date, the price would also reflect the ex price, but you would receive the distribution as well because you owned the units when they went ex. If you elect to reinvest your distributions, the number of units you receive will be determined by dividing the value of your distribution by the net asset value ex distribution on the ex date.