The specialist Fund Management team at TCGI has over 60 years of investment experience across a spectrum of equity investments, and is over-resourced relative to funds under management. The analysis will be carried out in-house and financial models will aim to evaluate investee companies better than the market. A Fair Value Pricing System will introduce discipline to the investment process. Face to face corporate meetings and regular contact will occur to achieve an edge in the market place. The investment style will be conservative and the focus will be on two key variables:

• attractive valuations relative to domestic and international peers and
• catalysts to release that value where the level of conviction is high.

The investment process will involve four phases:
1. Idea generation and screening
2. Stock analysis and fair value price established
3. Stock ranking by investment team
4. Portfolio construction to minimise volatility

TCGI will invest in profitable companies at sensible prices with the following six characteristics:

1. Above market EPS growth profile – typically in growth markets
This could be a function of acquisition opportunities in a fragmented market or attractive industry characteristics where the markets are growing faster than average or simply result from market share gains.

2. High and sustainable returns in terms of ROA and ROE
Profitable companies with high returns on their asset base produce a virtuous circle of strong cashflow conversion from operating profit which can then be re-invested or returned to shareholders.

3. Strong free cash flows with re-investment opportunities
Given the growth in the respective markets, companies that can re-invest strong free cashflow in their business and through acquisitions at superior returns will be attractive for the funds.

4. Recurring Revenue Streams with order visibility
These companies are typically mature within an industry with significant barriers to entry.

5. Diversified customer base where pricing power exists
In a low inflationary environment with cost pressures, companies with some degree of pricing power are better positioned to sustain margins and profitability.

6. Sound financials with a proven management track record
Modest gearing and high interest cover are required, augmented by a strong management team preferably with a substantial equity stake in the business to align their interests with those of shareholders.