Benefits of investing in the Bennelong Kardinia Absolute Return Fund

Investing in a managed investment scheme can offer a number of benefits, including:

• increasing purchasing power - the size of a managed investment scheme means it can generally buy and sell assets at a lower cost than an individual investing directly;

• investment opportunities - managed investment schemes give you the opportunity to access a range of assets that you may not normally access as an individual investor; and
• professional investment management - your money is managed by a team of professionals who use their resources, experience and specialist skills to make the investment decisions on behalf of all investors in the Fund.

Investor Suitability

The Fund is suitable for investors who are seeking absolute returns from a portfolio of Australian and New Zealand investments and have a reasonable tolerance to risk.

About the Fund

The Kardinia Long Short Fund is a long/short Australian equity fund, with the long-term objective of achieving double-digit annual rates of return without compromising on capital protection. Core to the strategy is fundamental stock selection to create a high conviction portfolio of between 20-50 stocks.

Investment Strategy

The Fund is a unit trust targeting absolute returns. In order to achieve the risk/return objectives of the Fund, a variety of strategies are employed in a portfolio of Australian and New Zealand listed equities, derivatives and cash. These strategies include:

• investing in a selection of long/short Australian and New Zealand listed equities, cash equivalent instruments, over-the-counter derivatives and exchange traded derivatives;

• long investments where price is expected to rise and shortinvestments where price is expected to fall;

• managing risk by implementing conservative gross and net exposure limits;

• not having any financial leverage; and

• imposing stop-loss limits.

The strategy will produce investment returns dependent on the asset allocation and investment selection skills of the investment team. The success of the Fund's investment strategy will depend on market conditions and may be influenced by specific risk factors set out in Section 4 of the PDS.

The Responsible Entity may, at its discretion, alter its investment objectives and strategy. Whilst there is no intention to change the investment strategy, you will be provided with written notice of any such changes.

How we invest your money

Investment Universe

The Fund will invest primarily in listed equities and cash equivalent instruments, with exchange traded and over-the-counter derivatives used to hedge market and company specific risks, and to gain market exposure to underlying securities. The Fund will not invest in unlisted investments (unless they are pending listing).

Exposure Limits

The Fund will employ the following key exposure limits:

• the combined exposure of gross Long and Short Positions is 150% of the Net Asset Value of the Fund;

• the net exposure to equities is unlikely to exceed 75% of the Net Asset Value of the Fund; and

• maximum exposure to any single equity investment at 10% of the Net Asset Value of the Fund.

The Investment Manager may from time to time temporarily exceed the exposure limits of the Fund, particularly during periods of market volatility, to allow for overweight holdings where the increase in value of the underlying security is due to market movements.

Liquidity

The Responsible Entity reasonably expects that it will be able to realise at least 80% of the assets of the Fund, at the value ascribed to those assets in calculating the Fund's Net Asset Value, within 10 days.

Leverage

The investment strategy is to not borrow money to generate financial leverage. However, the Fund may become leveraged through the occasional use of derivatives (such as options) and short selling which form part of the investment strategy of the Fund. The primary derivative and short selling counter-party used is the Prime Broker. There is no leverage embedded in the other assets of the Fund.

Derivatives

Derivatives are primarily used for the purpose of hedging physical positions where required. They can be used to hedge overall market risk at the portfolio level or to manage individual stock risk.

Derivatives can also be used to gain market exposure to underlying securities. The majority of the derivatives activity relates to efficient portfolio management, which enables the portfolio managers to gain access to particular markets more quickly or cheaply using derivatives than through the underlying instruments.

The types of derivatives are exchange traded derivatives and over-the-counter derivatives, limited to futures, exchange traded options, warrants, company issued or over-the-counter options on securities listed in the authorised investments mentioned above, as well as investments listed on US stock exchanges.