Realindex Australian Small Companies Fund - Class A

Quarterly Factsheet 31 December 2019 For Adviser use only

Portfolio Description Distributions The portfolio invests in smaller Australian companies by selecting and $0.12 weighting companies based on fundamental measures of company size. $0.10 Investment Strategy Realindex forms a universe of companies listed on the Australian Securities $0.08 Exchange that are outside both the ASX 100 and the 100 largest companies based on accounting measures. Factors such as quality, near-term value and $0.06 momentum are applied to form a final portfolio of companies. $0.04

Investment Objective $0.02 To provide capital and income growth by investing in smaller Australian companies and outperforming the S&P/ASX Small Ordinaries Accumulation $0.00 Index over rolling five-year periods before fees and taxes. Jun-10 Jun-12 Jun-14 Jun-16 Jun-18 Dec-19 Top 10 Holdings Product Overview Fund Benchmark Active APIR code FSF0978AU Weight Weight Weight Inception date 17 November 2008 Super Retail Group 2.00 0.70 1.30 Fund Size (A$) 1,207 million Chorus Limited 1.82 0.63 1.20 Benchmark S&P/ASX Small Ordinaries Accumulation Index A.P. Eagers 1.77 0.87 0.90 Number of stock holdings 202 Fisher & Paykel Healthcare 1.64 1.51 0.12 Buy / Sell spread 0.10% / 0.10% Australian Pharmaceutical Industries 1.59 0.27 1.32 Minimum investment (A$) 25,000 SKYCITY Entertainment 1.43 0.54 0.89 Management cost (p.a.)* 0.66% Platinum 1.42 0.67 0.74 Growthpoint Properties 1.40 0.59 0.81 * Information on Management Costs (including estimated indirect costs) is set out in the Fund’s PDS. Event Hospitality & Entertainment 1.38 0.00 1.38 Performance Summary (%) Inghams 1.30 0.55 0.75 Period 3mth 1yr 3yr 5yr 7yr 10yr SI

Net return 0.5 20.7 9.3 13.0 11.6 8.6 12.3 Risk Characteristics Benchmark return 0.8 21.4 10.0 10.6 6.8 4.1 7.9 Period 1yr 3yr 5yr 7yr 10yr SI Excess net return -0.3 -0.7 -0.7 2.4 4.8 4.5 4.3 Fund standard deviation (%) 7.7 8.2 10.8 11.4 12.3 14.7 Income return 2.2 7.6 8.5 8.5 8.1 8.0 7.7 Benchmark standard deviation (%) 10.4 10.9 12.4 12.9 14.4 15.4 Growth return -1.7 13.1 0.7 4.5 3.5 0.6 4.5 Tracking error (%) 4.6 4.6 4.8 5.0 5.3 5.9 Note: Net return is the return after management fee Fund Sharpe ratio 2.5 0.9 1.0 0.8 0.5 0.6 Information ratio -0.1 -0.2 0.5 1.0 0.8 0.7 Beta 0.7 0.7 0.8 0.8 0.8 0.9 Cashflow adjusted turnover (%) 21.2 23.9 26.9 28.0 30.5 Fund Active Sector Positions (%)

8 Active Weight Prior Year Active Weight Current 6 4.7 4.7 4.3 3.6 3.9 4 2.5 1.4 2 0.5 0.5 0 -0.1 0.0 -0.6 -0.7 -2 -1.0 -1.1 -1.8 -4 -2.6 -3.0 -3.7 -6 -4.5 -4.3 -5.6 -8 Consumer Communication Real Estate Utilities Consumer Staples Energy Health Care Industrials Financials Information Materials Discretionary Services Technology Realindex Australian Small Companies Fund - Class A

Top 5 Attributors To Performance (3 Months) Top 5 Detractors From Performance (3 Months) Stock Value added Stock Value detracted Chorus Limited 0.24% OceanaGold -0.42% Jumbo Interactive 0.21% A.P. Eagers -0.39% Metcash 0.18% Mineral Resources -0.24% Smartgroup 0.16% IOOF -0.23% SUMMERSET GROUP HO NPV 0.16% Pendal Group -0.18%

The Realindex Australian Small Companies Fund returned +0.46% (net of fees) during the December quarter, versus the S&P/ASX Small Ordinaries benchmark which returned +0.76%.

Over the quarter Value (-0.49%) underperformed growth (+0.47%) by -0.96%. Given the Value bias of the Realindex strategy, the portfolio proved to be relatively resilient to this headwind.

The largest detractor to performance came from Financials; however this mostly came from stock selection rather than the underweight allocation. More specifically, much of the performance was lost due to positioning within fund managers including not holding IOOF (+23.0%), Pendal (+19.8%), Pinnacle (+5.9%) and (+9.1%). The portfolio does not hold IOOF or Pendal as both are considered a ‘large’ company according to its accounting measures, whilst Pinnacle is considered too small. Janus Henderson is domiciled in the UK and only Australian or New Zealand domiciled can be held in the portfolio.

The portfolio’s underweight allocation to the strong-performing Information Technology sector also detracted from performance. Key negative contributors were the underweights to Bravura (+25.6%), Technology One (+16.6%) and IRESS (+12.6%). The largest detractor was Dicker Data (-12.6%), due to the stock not being in the benchmark. The stock however has been a major contributor over 12 months after returning almost 150% during 2019.

The largest sector contributor was Consumer Staples owing to positive stock selection, including large underweights to Costa Group (- 29.0%) and not holding Metcash (-12.1%). Costa, a former market darling and high momentum growth stock was forced to raise capital after its fourth profit warning in 12 months, while Metcash fell on challenging half year results.

Strong stock selection within Healthcare also contributed. This included an overweight to Fisher & Paykel Healthcare (+32.3%) which jumped after reporting a strong 1H result and not holding Pro Medicus (-19.7%), Healius (-14.3%) or Polynovo (-7.9%).

The portfolio benefitted from two capital raisings: Sealink (+34.9%), and Kathmandu (+17.5%). Both companies raised money to fund acquisitions of businesses within their sector. Whilst raising capital can be detrimental to a company’s share price, the market is willing to reward companies that use the funds for specific and relevant purposes as demonstrated by these two companies.

There were also three takeover announcements over the month; Webster (+58.4%), QMS Media (+30.4%) and Village Roadshow (+33.8%). These holdings added meaningful value as the first two are not in the Small Ordinaries benchmark whilst Village Roadshow is a large overweight. Each of these stocks displayed the characteristics of a typical takeover target including being cheap and having negative price momentum; both of which drive a relatively higher portfolio weight.

The portfolio offers a valuation discount to the market-cap benchmark, as measured by price-to-sales (24.9% discount) and price-to- book (8.5% discount), as well as a dividend yield higher than the benchmark (30.9% premium).

Note: Percentage figures in parenthesis show total return in Australian dollars for the quarter ending 31 December 2019 unless otherwise noted. Realindex Australian Small Companies Fund - Class A

Performance returns are calculated net of management fees and transaction costs. Performance returns for periods greater than one year are annualised. Past performance is not a reliable indicator of future performance. Data source: First Sentier Investors 2019 Data as at: 31 December 2019

Portfolio Beta measures the portfolio's sensitivity to benchmark movements. Mathematically, it is the covariance of the portfolio vs the benchmark divided by the variance of the benchmark. The covariance and variance are ex ante calculations based on current weights and historic patterns of return over the past five years. Turnover is the average of sales and purchases divided by the average portfolio size. Cashflow Adjusted Turnover is the same as above, except that the lesser of sales and purchases is used in place of the average of the two. This is to adjust for turnover that is related to investing inflows or selling stocks to meet outflows rather than related to of the portfolio.

www.realindex.com.au For further information

Head of Business Development Australia and New Zealand Key Account Manager - VIC/TAS Harry Moore +61 3 8618 5532 Nicholas Everitt +61 3 8628 5668 Head of Investment Sales and Key Accounts Business Development Manager - VIC/TAS Chris King +61 2 9303 2018 Jack Heinz +61 3 9675 6102 Key Account Manager - NSW Key Account Manager - QLD Angela Vincent +61 2 9117 1068 Quin Smith +61 4 5509 5505 Paul Sleiman +61 2 9303 3489 Key Account Manager - WA/SA/NT

Nathan Robinson +61 4 0327 2440

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