Smallco Investment Fund
Investment Objective:
Smallco Investment Manager (Smallco) operates a smaller company managed equity fund, the Smallco Investment Fund (SIF). Smallco aims to provide good performance in SIF through actively looking for high quality, smaller companies whose share price is significantly less than what Smallco considers to be the true underlying value of the shares.
Investment Universe:
Smallco invests mostly in smaller Australian listed companies, but may invest up to 20% of the fund in larger Australian listed companies and some cash. The manager classifies a smaller Australian listed company as a company outside the S&P/ASX 100 Index at the time the fund makes its initial investment.
How to Invest:
Smallco has historically limited the number of investors in the Fund when necessary to protect capacity and limit liquidity issues. It will continue to manage capacity and limit inflows using its power under the Fund’s constitution to reject applications at its discretion.
You should consider the Product Disclosure Statement (PDS) for SIF before deciding to invest. You can either download the PDS or request a hard copy by mail.
| Return as at: 30 JUN 2010 | |
|---|---|
| 1 month | 0.9% |
| 3 months | -5.6% |
| 6 months | -1.7% |
| 1 year* | 32.4% |
| 5 years* | 1.3% |
| Since inc.* (31/10/2000) | 9.4% |
*Returns annualised. Returns calculated after all fees and expenses and based on exit price and reinvestment of distributions. Past performance is not a reliable guide as to future performance. Returns are not guaranteed.
Latest Update:
30 June 2010
Smallco Investment Fund (SIF) returned 32.4% for the year ended 30 June 2010. The closing unit price was $1.6449 (a 5.84c distribution was paid and the ex distribution price was $1.5865).
The first six months of the 2010 financial year were characterised by equity markets rebounding strongly from the very depressed levels caused by the Global Financial Crisis. The Australian equity market’s improvement has been based on forecasts of an improving world economy and anticipation of improving corporate earnings to come through in the 2011 financial year. While we believe these two broad themes remain largely in place, the negative markets of the last six months have shown that recovery will vary significantly across countries and across companies.
ResMed (RMD) has been a strong contributor to the Fund’s performance over the last 6 months and is currently one of our largest holdings. RMD is an Australian technology success story. It is one of two companies that dominate the world market in medical products for the treatment of sleep apnea. The market for sleep apnea products has been growing at 12-15% pa. Strong growth in this market is expected to continue due to increasing public awareness of the debilitating effects of sleep apnea, increasing obesity and the fact that only a small percentage of the affected population is currently being treated.
RMD’s 20% growth in compound earnings per share over the last four years has been impressive. In the nine months to 31 March 2010 growth in earnings per share has accelerated to 35%. The company’s outlook remains encouraging. RMD has just had a major technology release which we expect will boost sales as well as reduce manufacturing costs by more than 10%. The company is also expected to benefit from a new testing practice which allows sleep apnea patients to be tested in their homes rather than having to go through the more intrusive process of being tested overnight in a sleep disorder clinic.
Looking forward, we are cautiously optimistic about the outlook for the Australian economy and, more significantly, about the medium term earnings outlook of the portfolio of quality companies in which the Fund is invested.
As an aside, it was pleasing to be recognised by our peers during the year. In May Smallco was announced as Money Management’s 2010 Australian Equities (Long Short) Fund Manager of the Year.
SIF remains opened to new investors. Historically we have strictly managed capacity to ensure the size of funds-under-management did not hinder performance. We will continue to monitor this and will re-close the Fund at a size that ensures it remains nimble.
Please note that we are available during business hours to further discuss any relevant issues or to provide ongoing SIF updates. Please feel free to contact Craig Miller, one of our Investment Managers, on 02 8256 1004.