DONALD SMITH & COMPANY ., INC.

The advisory business allows clients to place guidelines and restrictions on their accounts, including cash maximums, security weight maximums, sector/industry weight maximums, foreign investment maximums, soft-dollar usage, proxy voting authority, client-directed trade programs, restricted securities, and types of securities. The firm invests in securities listed on national exchanges, such as domestic equities, ADRs of foreign companies, dually-listed companies, and ordinaries of foreign companies for the Global Value Equity product. They do not utilize any derivatives or fixed income securities. Clients can also select performance-based fees. The firm's advisory business is further detailed in Item 4, which includes a description of the firm, its inception, principal owners, and client AUM. Additional items cover fees and compensation, performance-based fees, types of clients, investment strategies, disciplinary information, other financial industry activities, code of ethics, brokerage practices, account reviews, client referrals, custody, investment discretion, voting client securities, and financial information.

The firm employs a deep-value investment strategy, focusing on out-of-favor companies with stocks selling at discounts to tangible book value. They seek companies in the bottom decile of price-to-tangible book value ratios with a positive outlook for earnings potential over the next 2-4 years. Fundamental security analysis and basic research are central to their approach. While they analyze broad economic and sector trends, their primary approach is bottom-up, finding cheap stocks and then assessing industry and economic support for their company thesis. The firm prioritizes absolute risk, defining it as loss of principal, and controls it by buying stocks at deep discounts to book and asset value. They avoid derivative securities and invest in securities listed on national exchanges, including domestic equities, ADRs of foreign companies, and dually-listed companies. Individual position sizes are limited to about 5% of the portfolio at the time of purchase, with a maximum industry exposure of about 20%. They also analyze corporate management and governance, seeking managements that stick to their core business, cut costs, and avoid anti-dilutive acquisitions.

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