How We Invest

The Company provides investors with the opportunity to invest in a company with an actively managed portfolio of investments assembled through the application of a defined investment process and using the experience of the Manager's funds management team. 

The Company will predominantly invest in ASX listed securities and, where appropriate investments cannot be identified, cash. The Company will focus on absolute performance with respect to its investments. 

The Company intends to manage its Portfolio with a focus on absolute returns. This may involve owning anywhere from 10 to 100 stocks. 

The Company will undertake active capital management which may involve buy-backs of its Shares if they are trading at a sizeable discount to its net tangible asset backing and the issue of other securities through bonus issues, rights issues and option issues, with a view to enhancing the value of the securities held by the investor. The Company will also maintain a dividend reinvestment plan. 

 Investment Objectives

The investment objectives of the Company are to:

 * Derive an absolute return over the long term.

* Deliver investors an income stream in the form of fully franked dividends.

* Preserve the capital of the Company.

The Absolute Return Approach and Traditional Investment Strategies

The absolute return focus of the Company can be considered an "alternative" investment approach and may be contrasted with traditional asset management. 

"Traditional" asset classes include shares, property, fixed interest and cash. Investment outside the traditional asset classes are often referred to as forming part of the "alternative" asset class (which also includes private equity and "fund of funds"). They are referred to as "alternative" as the structure of portfolios and management techniques employed are significantly different from traditional practices.

As many traditional equity fund managers are not permitted or choose not to short sell securities, their funds' performance will be strongly influenced by the direction of the equity and bond markets. An investment in a "traditional" managed equity fund will therefore typically increase in value when the relevant equity market is performing strongly and result in a loss of capital if that market is performing poorly.

By contrast, an absolute return approach aims to deliver positive returns in a rising market as well as preserving capital in a falling market over the long term. A number of methods may be employed to achieve this objective including:

* Taking positions in a broader range of investments.

* Taking advantage of market arbitrage opportunities presented by corporate transactions from time to time.

* Short selling, which involves selling assets which are not owned but where the fund manager believes that it will be able to purchase at a lower price as the price is expected to fall.

* Obtaining leverage, which involves borrowing against assets that a fund owns and increasing exposure to a stock or financial market which the fund manager believes is rising.

* Resorting to significant cash holdings in falling markets or where appropriate investment opportunities cannot be identified.

The philosophy and principles applied by such an approach are outside that of the traditional investment principles where a fund's performance is judged relative to its movement against a particular benchmark or index such as the S&P/ASX 200 Index.

Returns of absolute return funds typically tend to have a low correlation to market indices and benchmarks that represent other asset classes such as shares, property or fixed interest. This low correlation means that movements in those variables are relatively independent of each other. Investment in absolute return-focused investment entities may therefore assist investors to diversify and reduce the overall volatility of their portfolios over the long term. 

The generation of returns by an absolute return fund is reliant on the skill of the manager, whereas traditional strategies may primarily reflect the return of an underlying asset class.

The investment objectives of the Company include the objective of preserving capital. Nevertheless, the Company will be exposed to adverse market conditions and returns for the Company may still be adversely affected in declining markets.

 Investment Philosophy

The investment philosophy of the Company is exemplified by the following broad principles:

 * The Company will seek to provide positive returns in all market conditions. It will look to do this by taking advantage of opportunities created by corporate transactions including takeovers, demergers, preference share conversions, IPO's, placements and sell downs or other trading and arbitrage opportunities.

* The universe of potential investments for the Company will be all securities quoted on the ASX or other exchanges, bills of exchange, other negotiable investments, debentures and other permitted investments identified in the Prospectus.

* The Company's philosophy is to invest wherever opportunities are identified irrespective of whether a "micro-cap" or a "large-cap" investment is involved.

* The Company's preference is to invest in entities where the securities are being issued or sold below the current market price or the Manager's valuation or are the subject of a corporate event.