• As an All Opportunities' fund, the underlying goal of the Manager is to assess the risk adjusted return of every potential opportunity identified by the Manager.

• The Manager's approach includes selectively and modestly taking higher-risk positions, provided that the potential return exceeds the additional risk - preferably in terms of both value and time.

• Whilst the Manager intends to combine the best principles of value investing, fundamental and technical analysis, it does not wish to be constrained by the constructs of any one approach.

• The key to the long-term success of the Company is seen as the capacity of the Manager to integrate the best principles of each discipline with the extensive and varied experiences of the Manager.

• This is achieved by encouraging flexibility and adaptability, but within the confines of an overall framework that controls risk.

About the Fund

Katana Capital was incorporated in September 2005 as a listed investment company providing shareholders with access to the investment services of Katana Asset Management Ltd. The Fund Manager employs a benchmark unaware long only Australian Equities investment philosophy with active use of cash holdings as a defensive mechanism within the portfolio to deploy into market weakness. The portfolio does not incorporate gearing or short selling of securities.

Katana Capital combines its listed investment company structure with the proven ability of its Manager to provide investors with access to comprehensive investment techniques aimed at providing capital and income returns. The Company and the Manager share similar investment philosophies.

The role of the Company is to assess and monitor the Manager and liaise with the Manager with respect to its Mandate as detailed in the Management Agreement.

The Fund Manager's allocation of the Portfolio will be weighted in accordance with various macroeconomic factors. These factors will invariably impact the medium and long term Performance of the Group. These factors include:

• global economy;

• Australian economy and positioning within the economic cycle;

• sectors within the Australian market;

• phase of the interest rate cycle; and

• state of the property market (e.g. comparative investment merit).

The Fund Manager may form views on the factors outlined above, may re-weight the Portfolio accordingly.

How we invest your money

The Fund Manager must manage the Portfolio in accordance with guidelines for management set out in the Mandate, which may be amended by written agreement between the Company and the Fund Manager from time to time. The mandate provides that the Portfolio will be managed with the following investment objectives:

1. to achieve a pre-tax and pre expense return which outperforms the ASX All Ordinaries Index; and
2. the preservation of capital invested.

The Mandate permits the Fund Manager to undertake investments in:

• listed securities;

• rights to subscribe for or convert to listed securities (whether or not such rights are tradable on a securities exchange);

• any securities which the Fund Manager reasonably expects will be quoted on the ASX within a 24 month period from the date of investment;

• listed securities for the purpose of short selling;

• warrants or options to purchase any investment and warrants or options to sell any investment;

• discount or purchase of bills of exchange, promissory notes or other negotiable instruments accepted, drawn or endorsed by any bank or by the Commonwealth of Australia, any State or Territory of Australia, or by any corporation of at least an investment grade credit rating granted by a recognised credit rating agency in Australia;

• deposits with any bank or corporation declared to be an authorised dealer in the short term money market;

• debentures, unsecured notes, loan stock, bonds, promissory notes, certificates of deposit, interest bearing accounts, certificates of indebtedness issued by any bank or by the Commonwealth of Australia, any State or Territory of Australia, any Australian government authority, or a corporation of at least an investment grade credit rating granted by a recognised credit rating agency in Australia;

• units or other interest in cash management trusts;

• underwriting or sub-underwriting of securities as and where permitted by relevant laws and regulations and the Fund Manager's AFSL; and

• any other investment, or investment of a particular kind, approved by the Company in writing as and where permitted by the Fund Manager's AFSL.

The Mandate specifies the following risk control features:

• The Portfolio may comprise securities in up to 80 companies from time to time.

• no investment may represent more than 10% of the issued securities of a company at the time of investment.

• total cumulative gearing on the Portfolio may not exceed 50% of the total value of the net tangible assets of the Group after tax.

• the Fund Manager will adhere to the parameters on a pre stock basis as set out in the table below unless the prior approval of the Board is received to do otherwise.