BLUE SKY SRA ALLIANCE FUND

Transcription

1 BLUE SKY SRA ALLIANCE FUND ARSN PRODUCT DISCLOSURE STATEMENT Ivestmet Sciece 4 Uits (APIR Code COL0018AU) Ivestmet Sciece 9 Uits (APIR Code COL0019AU) 3 JUNE 2014 Ivestmet Sciece 16E Uits (APIR Code COL0020AU) Ivestmet Sciece 16Q Uits (APIR Code OMF0010AU) Ivestmet Maager Blue Sky Ivestmet Sciece Asset Maagemet Pty Ltd ABN AFSL Resposible Etity Oe Maaged Ivestmet Fuds Limited ABN AFSL

2 Cotets Sectio page Sectio page IMPORTANT INFORMATION AND DISCLAIMER 3 6 FEES AND OTHER COSTS 32 1 FUND SUMMARY FEES AND COSTS TABLE 33 2 ASIC HEDGE FUND DISCLOSURE BENCHMARKS AND DISCLOSURE PRINCIPLES EXAMPLES OF ANNUAL FEES AND COSTS FOR THE FUND 36 3 FUND STRUCTURE AND INVESTMENT OBJECTIVES AND STRATEGY ADDITIONAL EXPLANATION OF FEES AND COSTS FUND STRUCTURE 21 7 TAXATION INVESTMENT OBJECTIVES OF THE FUND TAX POSITION OF THE FUND INVESTMENT STRATEGY AND GUIDELINE SUMMARY TAX POSITION OF AUSTRALIAN RESIDENT INVESTORS 41 4 RISKS GOODS AND SERVICES TAX ( GST ) GENERAL RISK FACTORS COMMON TO ALL INVESTMENTS SPECIFIC RISK FACTORS FOR THE FUND FOREIGN ACCOUNT TAX COMPLIANCE ACT TAX FILE NUMBER ( TFN ) AND AUSTRALIAN BUSINESS NUMBER ( ABN ) OTHER RISKS 26 8 ADDITIONAL INFORMATION MANAGING RISKS KEEPING YOU INFORMED 43 5 HOW TO INVEST AND YOUR INVESTMENT IN THE FUND HOW TO INVEST AND APPLICATIONS MASTER TRUSTS AND WRAP ACCOUNTS COOLING OFF WITHDRAWALS TRANSFERS UNIT PRICES DISTRIBUTIONS THE OPERATION OF THE FUND COMPLAINTS RESOLUTION PRIVACY ANTI-MONEY LAUNDERING 46 9 GLOSSARY HOW TO COMPLETE THE APPLICATION FORM COMPLETING THE APPLICATION FORM ANTI-MONEY LAUNDERING AND COUNTER-TERRORISM FINANCING 52 CORPORATE DIRECTORY 55 Applicatio Form Additioal Ivestmet Form

3 IMPORTANT INFORMATION AND DISCLAIMER Issuer Oe Maaged Ivestmet Fuds Limited ABN ad AFSL of Level 13, 20 Huter Street, Sydey NSW 2000 ( Resposible Etity, OMIFL or we ) is the issuer of this Product Disclosure Statemet ( PDS ) dated 3 Jue Ivestmet Maager Blue Sky Ivestmet Sciece Asset Maagemet Pty Ltd ( Ivestmet Maager ) is the ivestmet maager appoited to maage the Fud, the sub-trusts ad the Portfolios comprisig the assets of the sub-trusts, i which the Fud ivests. The Ivestmet Maager is a wholly owed subsidiary of Blue Sky Alterative Ivestmets Limited. The Blue Sky group of compaies is headquartered i Brisbae, with offices i Sydey, Melboure, Adelaide ad New York. Offer This PDS ivites you to apply for uits i the Blue Sky SRA Alliace Fud ARSN (the Fud ). This offer is ope to both retail ad wholesale cliets who are Australia residets ad who receive this PDS i Australia. If you receive this PDS i electroic form, you may obtai a paper copy (icludig the applicatio form) free of charge from your fiacial adviser, the Resposible Etity or the Ivestmet Maager. This PDS oly costitutes a offer of or ivitatio to acquire fiacial products to persos withi Australia or i places where it is lawful to make such a offer or ivitatio. The PDS has ot bee lodged with ASIC ad ASIC takes o resposibility for the cotets of this PDS. Other tha the Resposible Etity ad the Ivestmet Maager, o perso has caused or authorised the issue of this PDS or does ay of them take ay resposibility for the preparatio of this PDS or the establishmet or performace of the Fud. Electroic copy of PDS If a electroic copy of this PDS is prited, all pages, icludig the applicatio form, must be prited. If this PDS is made available to aother perso, they must be provided with the etire electroic file or pritout, icludig the applicatio form. A paper copy of this PDS (ad ay supplemetary documets) may be obtaied free of charge o request from your fiacial adviser, the Resposible Etity or the Ivestmet Maager. Updated Iformatio Iformatio i this PDS may be updated from time to time. Updated iformatio will be provided o the Resposible Etity s website at Ivestors are ecouraged to visit the site regularly for this purpose. A paper copy of the updated iformatio will also be available, free of charge, upo request from the Resposible Etity. Where updated iformatio about the Fud is materially adverse to ivestors, the Resposible Etity may take a umber of actios which iclude issuig a ew or supplemetary PDS. If the chage relates to a icrease i fees ad costs charged, at least 30 days otice will geerally be give to you. No Persoal Advice or guaratee as to performace Noe of the Resposible Etity, the Ivestmet Maager or ay of their related bodies corporate, affiliates, associates or officers of ay of the above etities makes ay recommedatio as to the suitability of a ivestmet i the Fud for ay ivestor or makes ay represetatio or gives ay assurace as to the performace of the Fud or ay particular rate of retur. Nor do they guaratee the repaymet of capital from the Fud. Your ivestmet is subject to ivestmet risk, icludig possible delays i repaymet ad loss of icome ad pricipal ivested, ad o party ivolved i the Fud i ay way stads behid the capital value ad/or performace of the Fud. No represetatio is made with respect to the taxatio cosequeces of a ivestmet i the Fud. You should seek your ow fiacial, taxatio ad ivestmet advice before ivestig i the Fud. Before makig a ivestmet decisio o the basis of this PDS, you should cosider, i cojuctio with your fiacial adviser, whether a ivestmet i the Fud is appropriate i view of your particular ivestmet eeds, objectives, fiacial ad taxatio circumstaces. It is importat that you read the etire PDS icludig the Sectio 4: Risks before makig ay decisio to ivest. No iformatio or represetatio i coectio with the offer, which is ot cotaied withi this PDS, should be relied upo i makig a ivestmet decisio about the offer. No perso is authorised to make represetatios i respect of the offer which are ot cotaied i this PDS. Page 3

4 Past Performace Ay referece to past performace iformatio provided i this PDS is give for illustrative purposes oly ad should ot be relied upo as (ad is ot) a idicatio of future performace. Defied terms Capitalised terms used i this PDS have the meaigs give to them i the text uless the cotext requires otherwise. Glossary A glossary of terms is provided i Sectio 9: Glossary of this PDS. Further iformatio For further iformatio regardig this offer please cotact your adviser. You may also cotact the Ivestmet Maager or the Resposible Etity. Their cotact details are i the Corporate Directory. Currecy I this PDS, all amouts are expressed i Australia dollars uless otherwise idicated. This PDS is a importat documet which should be read carefully ad i its etirety before makig a decisio whether or ot to ivest i the Fud. Visit for iformatio updates. Page 4

5 SECTION 1: FUND SUMMARY The Fud Blue Sky SRA Alliace Fud ARSN The Fud is a registered maaged ivestmet scheme. Sectio 3.1 Resposible Etity Oe Maaged Ivestmet Fuds Limited Sectio 8.2 Ivestmet Maager Blue Sky Ivestmet Sciece Asset Maagemet Pty Ltd Sectio 8.2 Classes of Uits The Fud offers classes of uits which ivest i separate sub-trusts. The Fud curretly offers four classes of uits the Ivestmet Sciece 4 Uits (APIR Code COL0018AU), the Ivestmet Sciece 9 Uits (APIR Code COL0019AU) the Ivestmet Sciece 16E Uits (APIR Code COL0020AU) ad the Ivestmet Sciece 16Q Uits (APIR Code OMF0010AU). The assets attributable to each class of uits are ivested i four sub-trusts the Ivestmet Sciece 4 Trust, the Ivestmet Sciece 9 Trust, the Ivestmet Sciece 16E Trust ad the Ivestmet Sciece 16Q Trust (each a sub-trust ). The assets of each sub-trust respectively comprise the Ivestmet Sciece 4 Portfolio (IS 4), the Ivestmet Sciece 9 Portfolio (IS 9) the Ivestmet Sciece 16E Portfolio (IS 16E) ad the Ivestmet Sciece 16Q Portfolio (IS 16Q) (each a Portfolio ). Collectively ad throughout this PDS the ivestmet i each respective uit, sub-trust ad Portfolio is termed IS 4, IS 9, IS 16E ad IS 16Q. Sectio 2 Sectio 3.1 Ivestmet objective The ivestmet objective of each of the IS 4, IS 9, IS 16E ad IS 16Q Portfolios is to seek to maximise the retur o the Portfolio withi a pre-determied volatility target for that Portfolio. Sectio 2 Sectio 3.2 Volatility target The log-term volatility target for each Portfolio is as follows: volatility target IS 4 4% per aum Sectio 2 Sectio 3.2 Sectio 3.3 IS 9 IS 16E IS 16Q 9 % per aum 16% per aum 16% per aum The higher the volatility target the higher the risk that is take. Miimum Iitial Ivestmet [1] Aggregate ivestmet $20,000 ad if ivestig i more tha oe class of uits the miimum i a class: IS 4 $5,000 IS 9 $5,000 IS 16E $5,000 IS 16Q $5,000 Sectio 5.1 Page 5

6 Miimum Additioal Ivestmet [1] Aggregate additioal ivestmet $5,000 ad if addig to a class of uits held, a miimum i a class: IS 4 $2,000 IS 9 $2,000 IS 16E $2,000 IS 16Q $2,000 Sectio 5.1 Withdrawals [1] The miimum amout is $5,000 i the aggregate ad $2,000 i ay oe class of uits. Sectio 5.3 Etry ad Exit Fees Noe. Sectio 6.1 Applicatios ad Withdrawals All applicatios must be received before 4pm Australia Easter Stadard Time ( AEST ) o the secod last busiess day of the week to be issued at the uit price calculated as at close of busiess o the last busiess day of the week (a Dealig Day ). All withdrawal requests must be received before 4pm AEST o the last busiess day of the week to be processed at the uit price calculated as at the close of busiess o the last busiess day of the ext week (a Dealig Day). Sectio 5.1 Sectio 5.4 Uit pricig The uit price for each of the classes of uits is calculated weekly, as at close of busiess o the last busiess day of the week (a Dealig Day). Sectio 5.1 Sectio 5.4 Sectio 5.6 Maximum Buy / Sell Spread Spread IS 4 IS 9 IS 16E IS 16Q Buy 0.22% 0.22% 0.13% 0.13% Sell 0.22% 0.22% 0.13% 0.13% Sectio 6.3 Coolig off Coolig off rights may apply to some applicats. Sectio 5.3 Suggested Miimum Holdig Period 5 years. - Risks Before ivestig i the Fud ivestors should cosider carefully the risks associated with a ivestmet i the Fud referred to i Sectio 2: ASIC Hedge fud bechmark ad disclosure priciples ad the geeral, specific ad other risks outlied i Sectio 4: Risks. Ivestors should cosider obtaiig idepedet fiacial ad taxatio advice o whether a ivestmet is suitable for their objectives, fiacial situatio ad eeds. Sectio 2 Sectio 4 Page 6

7 Maagemet Fee (% per aum of the Net Asset Value of the relevat class, icludig GST less available RITC) Uit Class IS 4 IS 9 IS 16E IS 16Q Maagemet Fee % % % % Sectio 6.1 Performace Fee (IS 16E ad IS 16Q Uits oly) 20.5% (icludig GST less RITC) of the outperformace, after maagemet fee, of the IS 16E ad IS 16Q Uits over the Bechmark Retur, payable at the ed of each caledar quarter or whe uits are withdraw, if this occurs betwee caledar quarters. The fee calculatio is also subject to a high water mark, i.e. it is oly paid o icreases i the out performace to ew higher levels o which o prior performace fee has bee paid. Sectio 6.1 Bechmark Retur The retur of the official RBA target cash rate, calculated by compoudig the arithmetic average rate from Dealig Day to Dealig Day. Sectio 6.1 Distributios Usually half yearly, as at 30 Jue ad 31 December. Sectio 5.7 Reivestmet of Distributios Yes. Sectio 5.7 Taxatio cosideratios A tax summary for Australia ivestors is provided i this PDS. Sectio 7 Complaits The Resposible Etity has a procedure to deal with complaits from ivestors i the Fud. Sectio 8.3 Note: [1] These miimum amouts do ot apply to applicatios or withdrawal requests received from master trusts, wrap accouts or other admiistratio platforms ad the Resposible Etity may waive ay miimum amout o a case by case basis at its discretio. Page 7

8 SECTION 2: ASIC HEDGE FUND DISCLOSURE BENCHMARKS AND DISCLOSURE PRINCIPLES The o-traditioal ivestmet techiques employed i the Blue Sky SRA Alliace Fud mea that the Fud is categorised as a hedge fud for the purpose of ASIC regulatory guide 240 Hedge Fuds: Improvig disclosure ( RG 240 ). The followig sectio tells ivestors what iformatio is required by RG 240 ad gives that iformatio or lets ivestors kow where additioal iformatio, if ay, is to be foud i this PDS. Some of this iformatio will chage from time to time. It will be updated by the Resposible Etity whe there is ay material chage to a matter, or a sigificat evet that affects a matter, as well as whe there are chages i the periodic reportig as to the Fud. Visit for iformatio updates. Bechmarks Bechmark 1: Valuatio of Assets Meetig the bechmark The Resposible Etity has ad implemets a policy that requires valuatios of the Fud s assets that are ot exchage traded to be provided by a idepedet admiistrator or a idepedet valuatio service provider. The Resposible Etity meets this bechmark. The valuatio of the assets of the Fud ad the Portfolios are provided by the Fud Admiistrator, which is urelated to ay of the Resposible Etity, the trustee of the sub-trusts ( Trustee ) ad the Ivestmet Maager. Bechmark 2: Periodic reportig of key iformatio Meetig the bechmark For further iformatio, see Sectio 8.1 The Resposible Etity has ad implemets a policy to provide periodic reportig o certai key iformatio (icludig curret fuds uder maagemet ad ivestmet returs) o a aual ad mothly basis. The Resposible Etity meets this bechmark. The Resposible Etity esures that the required iformatio is periodically reported to ivestors o a mothly ad aual basis i order to esure that they ca cotiue to make ogoig assessmets of the risks associated with their ivestmet. The reports are available o the Resposible Etity s web site ad the Ivestmet Maager s website Ivestors are remided that past performace is ot idicative of future performace. Page 8

9 Disclosure Priciples Disclosure priciple 1: Ivestmet strategy Disclosure For further iformatio, see Sectios 3.2, 3.3 ad 4.2 The Resposible Etity discloses the followig iformatio: the Fud s ivestmet strategy The Ivestmet Maager seeks to maximise its exposure to proprietary ivestmet strategies ad market risks through its trade marked Strategic Risk Allocatio (SRA ) portfolio costructio methodology. The SRA methodology targets risk (or volatility) rather tha specific asset classes as the predomiat driver of returs. I so doig, it provides a more diversified ad tactical set of ivestmet strategies tha typical coservative, growth or equity fuds that are more asset class costraied. IS 4 Portfolio IS 4 has bee developed as a alterative strategy to typical coservative fuds, which rely o a large allocatio to bods, ad limited diversificatio through equities, to achieve their retur objectives (ad typically ru at volatility levels of approximately 4% per aum). IS 4 geerates returs by ivestig i a diverse rage of assets with specialist maagers i uderlyig fuds or maaged accouts while hedgig out currecy ad equity risk to a log term target of il. IS 9 Portfolio IS 9 has bee developed as a alterative strategy to typical growth fuds, which rely o a large allocatio to equities, ad limited diversificatio through bods, to achieve their real retur objectives (ad typically ru at volatility levels of 9% per aum over the log term). IS 9 geerates returs by ivestig i a diverse rage of assets with specialist maagers i uderlyig fuds or maaged accouts ad maitaiig a positive exposure to equity markets over the log term. The Ivestmet Maager has the ability to tactically shift the equity exposure up or dow depedig o the uderlyig ecoomic coditios. IS 16E Portfolio IS 16E is a Portfolio of quatitative tradig strategies, diversified across currecy, commodity, equity ad iterest rate markets, utilisig derivatives ad short sellig i its strategy executio. The Ivestmet Maager uses a Ecoometric method (the E i 16E) for allocatig risk to the uderlyig strategies. IS 16Q Portfolio IS 16Q is also a Portfolio of quatitative tradig strategies, diversified across currecy, commodity, equity ad iterest rate markets, utilisig derivatives ad short sellig i its strategy executio. The Ivestmet Maager uses a Quatitative method (the Q i 16Q), for allocatig risk to the uderlyig strategies. All assets of the Fud are held i Australia dollars or Australia deomiated ivestmets. All Portfolio assets are deomiated i the currecy of the ivestmet, which iclude AUD, USD ad other currecies. Portfolio ivestmets are hedged back to AUD ad to the extet that they are ot hedged to AUD the a active ivestmet decisio is made to be profitable to the Portfolio. how the strategy produces ivestmet returs The ivestmet strategy will produce ivestmet returs depedet o the asset allocatio ad ivestmet skills of the ivestmet team i achievig the target volatility for the relevat Portfolio. Page 9

10 key depedecies or assumptios The success of the ivestmet strategy depeds o a umber of factors, icludig market coditios ad will be iflueced by specific risk factors set out i Sectio 4.2. Returs will be further based o the ivestmet team beig able to idetify ad ivest i strategies ad through ivestmet maagers which outperform their stated bechmarks. ivestmet diversificatio guidelies or limits The IS 4 ad IS 9 Portfolios are ivested through specialist maagers i uderlyig fuds or maaged accouts. Ay ivestmet i a iteral fud or oe maaged by a related party will be disclosed as part of the ogoig disclosure requiremets. The uderlyig assets are diversified across may differet equities markets (e.g. Asia, emergig markets, large ad small capitalisatio) ad o-equity ivestmets (e.g. commodities, currecies, iterest rates ad alterative ivestmets). The IS 4 ad IS 9 Portfolios may also ivest i the IS 16E ad IS 16Q classes of uits, up to a maximum aggregate limit of 13% of the Net Asset Value of the Portfolio for IS 4 ad 20% of the Net Asset Value of the Portfolio for IS 9. The level of ay such ivestmet will be disclosed as part of the ogoig disclosure requiremets. The IS 16E ad IS 16Q Portfolios may ivest i assets similar to those used by the IS 4 ad IS 9 Portfolios however the mai strategy for the IS 16E ad IS 16Q Portfolios is to ivest directly ito liquid global markets. The Ivestmet Maagemet Agreemet cotais certai rages as to the percetage of the IS 16E ad IS 16Q Portfolios that may be ivested i certai classes of assets (See Disclosure priciple 4: Valuatio, locatio ad custody of assets below). Each Portfolio must maitai certai levels of liquidity (see Disclosure priciple 5: Liquidity below). For each Portfolio, assets must be selected cosistetly whilst seekig to achieve the overall volatility that meets the target volatility of the relevat Portfolio. specific risks By desig the Portfolios are costructed usig o-traditioal ivestmets ad otraditioal techiques. These characteristics ca ad will mea that the Ivestmet Maager of the Portfolios, ad the maagers of the uderlyig fuds ad maaged accouts may icorporate leverage, derivatives ad short sellig i their ivestmet process. Whilst ot all maagers ecessarily employ all these techiques, ivestmet i the Fud meas that ivestors ca be exposed to more complex risks tha ivestors i fuds pursuig more vailla strategies. These risks iclude those described as Liquidity risk, Derivatives risk, Margiig risk, Couterparty risk ad Short sellig risk i Sectio 4: Risks. key aspects of the risk maagemet strategy For the IS 4 ad IS 9 Portfolios broad-based risk exposures are moitored usig data from the specialist maagers. The Ivestmet Maager seeks to maage risks icludig those comig from equity markets ad currecy markets by hedgig with derivatives i accordace with the ivestmet strategy. For the IS 16E ad IS 16Q Portfolios, detailed risk exposures are moitored o a daily basis. Exposures are reduced below explicit pre-defied limits if ecessary. Risk aalysis tools for the IS 16E ad IS 16Q Portfolios iclude: sesitivity aalysis o each type of exposure; ad value-at-risk calculatios. chages to ivestmet strategy ad otice of chage The Resposible Etity may, at its discretio, alter the ivestmet objectives ad strategy for the Fud ad the Portfolios. While there is o curret itetio to do so, ivestors will be provided with writte otice of ay material chages. Ay decisio ot to use the uderlyig SRA ivestmet strategy will be cosidered to be a material chage ad will be otified to ivestors before the chage ad a ew or a supplemetary product disclosure statemet will be issued. Page 10

11 Disclosure priciple 2: Ivestmet maager Disclosure For further iformatio, see Sectios 3.2, 3.3 ad 8.2 The Resposible Etity discloses the followig iformatio: Blue Sky Ivestmet Sciece Asset Maagemet Pty Ltd is the ivestmet maager of the Fud ad each of the Portfolios. the idetity of ay ivestmet maager the idetity, relevat qualificatios ad experiece of idividuals havig a key role i ivestmet decisios ad the proportio of time spet o ivestmet decisios Simo Kitso ad David Toohey the fouders of Blue Sky Ivestmet Sciece Asset Maagemet Pty Limited (formerly Ivestmet Sciece Asset Maagemet Pty Limited) cotiue to lead the ivestmet teams followig the compay s acquisitio by Blue Sky Alterative Ivestmets Limited i April Each is adequately qualified ad experieced i the maagemet of the Fud s assets. They are egaged i ivestmet decisio-makig ad maagemet of the Fud ad other ivestmet vehicles employig a SRA approach o a full time basis. The full biographies ad other details of Simo Kitso, David Toohey ad the rest of the ivestmet team are available at ay uusual or materially oerous (from the uit holders perspective) terms i the ivestmet maagemet agreemet The Ivestmet Maagemet Agreemet cotais stadard terms ad coditios. It does ot have ay terms that are uusual or materially oerous from the perspective of the uit holders. circumstaces i which the Resposible Etity may termiate the appoitmet of the ivestmet maager ad o what terms (icludig ay paymets) Each of the Resposible Etity (i respect of the Fud) ad the Trustee (i respect of a Portfolio) may termiate the egagemet of the Ivestmet Maager uder the Ivestmet Maagemet Agreemet by givig ot less tha 30 Busiess Days otice or for cause, such as breach of the agreemet, isolvecy or ceasig to have the ecessary authorisatios to act. No additioal fee is payable to the Ivestmet Maager o termiatio of the appoitmet. Page 11

12 Disclosure priciple 3: Fud Structure Disclosure For further iformatio, see Sectios 3.1 ad 8.2 The Resposible Etity discloses the followig iformatio: the Fud s ivestmet structure The ivestmet structure, which is preseted i the diagram i Sectio 3.1, is basically a 3 tiered structure: the Fud at the top, the four sub-trusts, ito which the class assets are ivested ad, where relevat the uderlyig fuds or maaged accouts ito which the Portfolios of the sub-trusts predomiatly ivest. The Fud is a Australia registered maaged ivestmet scheme, each sub-trust is a Australia uregistered maaged ivestmet scheme ad the uderlyig fuds may be Australia or foreig ad may be regulated or uregulated. the idetities of the key service providers The mai service providers to the Fud ad the sub-trusts are the Ivestmet Maager, the Custodia ad the Fud Admiistrator as described i the Corporate Directory. Each is based i Australia ad regulated by Australia law. I additio to its ivestmet maagemet services, the Ivestmet Maager also provides certai other maagemet services to the Fud ad the sub-trusts. Key service providers also iclude brokers. The brokers allow the Fud to execute its hedgig ad ivestmet strategies. Brokers may chage from time to time. how the Resposible Etity esures those service providers comply with their service agreemet obligatios The appoitmet by the Resposible Etity or the Trustee of the sub-trusts of ay service provider for the Fud or the Portfolios is udertake i accordace with the Outsourcig Policy of OMIFL. This policy sets out the procedures to be followed ad the persos resposible for moitorig the service provider s compliace with the terms of egagemet, icludig compliace with service stadards, periodic performace reviews, reportig obligatios, receipt ad adherece to istructios, isurace, busiess ad data risk maagemet ad recovery procedures, sig offs, maiteace of the competecy, qualificatios ad experiece of the staff ad the like. ay related party relatioships withi the structure The Resposible Etity ad the Trustee of the sub-trusts are related parties. Noe of the Ivestmet Maager, the Custodia, the Fud Admiistrator or other service providers, icludig the couterparties ad prime brokers ad futures clearig brokers, is a related party of the Resposible Etity or the Trustee of the sub-trusts. Other tha the possibility of the IS 4 ad IS 9 Portfolios potetially ivestig i the IS 16E ad IS 16Q Portfolio, oe of the uderlyig fud maagers is a related party of the Resposible Etity, the Trustee, the Ivestmet Maager, the Custodia or the Fud Admiistrator. ay arragemets that are ot o arm s legth terms There are o material arragemets i coectio with the Fud or the sub-trusts that are ot o arm s legth terms or for which approval of the ivestors i the Fud is required as beig a related party trasactio. the due diligece process performed o uderlyig fuds ad their key service providers The Ivestmet Maager performs a comprehesive due diligece of each maager selected for the Portfolios icludig a quatitative ad a qualitative scree, which icludes a determiatio of the maager s ability to outperform its stated bechmark. As part of its iitial ad ogoig due diligece, the Ivestmet Maager assesses the liquidity of the uderlyig assets, the ivestmet structure of the uderlyig fud, the jurisdictios i which the fud maagers reside as well as the quality ad idepedece of their support ad valuatio services (auditor, admiistrator, custodia, brokers). The Ivestmet Maager may egage third parties to assist i this selectio process. The list of uderlyig fud maagers is provided as part of the periodic reportig to ivestors as oted i Bechmark 2: Periodic reportig of key iformatio above. Page 12

13 reasoable estimate of aggregate fees ad costs charged by the uderlyig fuds Where the Ivestmet Maager chooses to make ivestmets i uderlyig fuds or maaged accouts, the maagers of these ca ad do charge their ow fees. These fees rage i magitude from a simple uderlyig percetage, e.g. 1.25%, to more complex uderlyig percetages plus performace fees. Performace fees are frequetly i the magitude of 10%-20% ad ofte subject to bechmark outperformace ad high water marks. All ivestmet returs show are et of all fees. As part of its due diligece, the Ivestmet Maager assesses the levels of fees attached to all ivestmets ad importatly the et of fees potetial that each maager presets. As a result of log stadig relatioships, early ivestig ad volumes, the Ivestmet Maager ca ad does egotiate these fees at a wholesale level. Ivestors should be aware that i aggregate (base ad performace fee) uderlyig fud maagers charge betwee 1.5% ad 3% of the gross value of the assets ivested with them depedig o their idividual performace. As disclosed i Disclosure priciple 1: Ivestmet Strategy, the IS 4 ad IS 9 Portfolios may ivest i the IS 16E ad IS 16Q Portfolios. For each fud that holds related party ivestmets, the value of those related party ivestmets will ot be icluded i the et asset value o which ay maagemet fee is calculated for that fud. This esures that ivestors will ot be charged twice o ay related party ivestmets. jurisdictios of the etities The Fud ad each sub-trust is a Australia ivestmet vehicle. Where the ivestmets are i uderlyig fuds the there are typically further legal etities used by that uderlyig maager. Some of these etities ca ad will be outside of Australia frequetly for the purposes of distributig the offerigs globally or for tax efficiecy. These structures are frequetly located i jurisdictios such as Luxembourg, the Cayma Islads ad the British Virgi Islads amogst others. risks of the Fud structure, icludig ivestig i uderlyig fuds overseas There are risks i uderlyig fuds that are overseas as well as Australia. This is because differet (ad potetially less vigorous) regulatory regimes may apply. I additio, distace ad time zoes may make moitorig, reportig ad ogoig due diligece less efficiet ad effective whe compared to domestic fuds. Page 13

14 Disclosure priciple 4: Valuatio, locatio ad custody of assets Disclosure For further iformatio, see Sectio 3.3 The Resposible Etity discloses the followig iformatio: the key aspects of the valuatio policy The valuatio policy of the Resposible Etity requires that the value of the assets of each class of uits i the Fud, ad the value of each of the IS 4, IS 9, IS 16E ad IS 16Q Portfolios are able to be valued i the maer ad at the times required i the Costitutio of the Fud ad the Trust Deeds of each sub-trust. Assets will ormally be valued at the market value but if that is ot available or if it is cosidered that value materially overstates or uderstates the value, the value is determied i accordace with a verifiable methodology ad idustry stadards, ad verified or reviewed by a idepedet source or by the Fud Admiistrator i cosultatio with the Resposible Etity ad the Ivestmet Maager. I terms of idepedece of valuatios, the IS 4, IS 9, IS 16E ad IS 16Q uit classes use a idepedet admiistrator ad custodia to value ad hold all of their uderlyig assets. Where a uderlyig fud is ivested ito, the Ivestmet Maager performs the requisite due diligece to esure that it ca be satisfied that this ivestmet also has third party admiistrators providig idepedet valuatios. the types of assets that the Fud does or may ivest i ad the allocatio rage for each asset type The assets of each class of uits i the Fud must be ivested i the relevat sub-trust (ad cash). For each of the IS 4, IS 9,IS 16E ad IS 16Q Portfolios, the assets i which the sub-trusts ca ivest are broad ad by desig the Ivestmet Maager is permitted to ivest across a broad spectrum, subject to the guidelies oted i Disclosure priciple 1: Ivestmet Strategy above. Ivestable assets iclude, cash ad liquid securities where the issuer is rated A2 or higher, derivative cotracts (icludig equity idices, moey market, iterest rate, commodity, debt or foreig exchage), pooled ivestmets (such as other uderlyig fuds), physical gold ad other such ivestmets that may from time to time be agreed betwee the Ivestmet Maager, the Resposible Etity ad the Trustee. The Ivestmet Maager may log or short these assets i order to achieve the objectives of the respective Portfolios. The IS 16E ad IS 16Q Portfolios may also ivest i listed shares, debt securities ad derivative cotracts based o shares. There is o ivestmet allocatio rage for ay class of assets (other tha a miimum of 1.0% of the Net Asset Value beig held i cash ivestmets i the IS 4 ad IS 9 Portfolios, a miimum of 15.0% of the Net Asset Value beig held i cash ivestmets i the IS 16E ad IS 16Q Portfolios, ad a -20% to +20% of the Net Asset Value beig held i equity like ivestmets i the IS 4 Portfolio). Despite the ivestmet spectrum beig broad, the Ivestmet Maager must maage the Portfolios such that the volatility targets are expected to be met over the log term. The Ivestmet Maager is prohibited from ivestig i property ad hybrid securities uless they are wholly cotaied i a maaged discretioary accout or are a pooled ivestmet. I additio, exchage traded futures cotracts that are ot traded o a recogised exchage i a OECD coutry are also prohibited. Pooled ivestmets, i.e. those ivestmets i uderlyig fuds, are urestricted i terms of the strategy they employ. By desig, the Portfolios seek maagers i all asset classes that outperform their stated bechmarks. The ivestmets ca ad will chage over time as the potetial for uderlyig maagers to outperform is eroded or is cosidered to o loger hold. This meas that maagers will ivest across a rage of assets ad icorporate a rage of o-vailla strategies i seekig outperformace. Strategies are provided through periodic reportig to ivestors. Strategies are expected to iclude Australia equities (large ad small cap), iteratioal equities (large ad small cap), emergig markets, log/short equities, special evets, currecy, global macro ad, tred followig amogst others. The Ivestmet Maager provides summaries of all ivestmet maagers icluded i the Portfolio i its mothly reports (See Bechmark 2: Periodic reportig of key iformatio above). Page 14

15 ay policy about the geographic locatio of the asset There are o restrictios o the geographic locatio of ay assets. the geographic locatio of ay material asset No material assets are located outside OECD coutries. Cash o deposit is held i Australia, ad brokerage accouts are curretly held i Australia, the USA or UK. the custodial arragemets All assets of the Fud are held by the Custodia. All assets of each Portfolio are held by the Custodia except bullio accouts with the Perth Mit (held by the Trustee) ad cash balaces held with brokers. Margi accouts held with brokers fluctuate from time to time ad are likely to cosist of up to 50% of the Net Asset Value of each Portfolio. Disclosure priciple 5: Liquidity Disclosure For further iformatio, see Sectios 3.3 ad 4.2 As the Resposible Etity caot reasoably expect to realise at least 80% of its assets, at the value ascribed to the assets i calculatig the Fud s et asset value, withi 10 days, the Resposible Etity should disclose: a descriptio of ay asset class that has a value greater tha 10% of the Fud s et asset value ad caot reasoably be expected to be realised at the value ascribed to the assets i calculatig the Fud s et asset value withi 10 days At ay time more tha 20% of the assets of a Portfolio may ot reasoably be expected to be able to be realised withi 10 days. This is primarily as a cosequece of ivestig i uderlyig fuds with a mothly or loger withdrawal term. All ivestmets icludig their expected liquidity are reported as part of the reportig uder Bechmark 2: Periodic reportig of key iformatio above. The uderlyig ivestmets of the Portfolios ca ad will chage over time ad as such ivestors should keep up to date with curret asset liquidity as disclosed by the Resposible Etity. Page 15

16 the key aspects of its liquidity maagemet policy The key aspects of the liquidity maagemet of the IS 4 ad IS 9 Portfolios iclude the followig requiremets i the Ivestmet Maagemet Agreemet: Borrowig is ot permitted except to facilitate short-term cash flows. Ivestmet i a sigle fud maaged by a specialist maager must ot exceed 20% of the Net Asset Value of the Portfolio. The Portfolio must hold i liquid fuds (bak accout or moey market istrumets) a miimum of 1% of the Net Asset Value of the Portfolio. The Ivestmet Maager must hold at least 40% of the Net Asset Value of the Portfolio i assets that have daily pricig ad liquidity, with fuds beig available i the ormal course of busiess withi 10 Busiess Days or earlier. For the IS 16E ad IS 16Q Portfolios, the Ivestmet Maagemet Agreemet provides that liquidity is maaged as follows: Borrowig is ot permitted except to facilitate short-term cash flows. The Portfolio must hold i liquid fuds (bak accout or moey market istrumets) a miimum of 15% of the Net Asset Value of the Portfolio. Icludig liquid fuds ad all amouts i margi accouts, at least 40% of the Net Asset Value of the Portfolio must be held i assets that have daily pricig ad liquidity, with fuds beig available i the ormal course of busiess i 10 Busiess Days or earlier. The Ivestmet Maager is permitted to ad does ivest i uderlyig fuds that have mothly ivestmet terms. This meas that ivestmets i such uderlyig fuds could take as log as 75 days to realise the assets which is greater tha the weekly pricig offered by the Fud. The amout of ivestmet i these assets is carefully moitored i order to maitai sufficiet liquidity to meet the Portfolio s foreseeable commitmets. The Ivestmet Maager as part of its due diligece process specifically targets uderlyig fuds that trade i more liquid assets such as equities, currecies ad commodities despite their ow liquidity terms beig mothly or loger. Nevertheless, there remais a risk that ivestmets are difficult to purchase or sell due to varyig or uusual market circumstaces. The Ivestmet Maager or uderlyig fuds may be uable to establish, close-out or rebalace a ivestmet positio or exposure i a timely fashio ad/or at a favourable or fair market price. The liquidity positios of the Fud, icludig applicatios ad requests for withdrawals, ad the Portfolios are carefully moitored ad maaged by the Ivestmet Maager o a weekly basis ad are stress tested o a regular basis i accordace with the requiremets of the Resposible Etity ad the Trustee. Page 16

17 Disclosure priciple 6: Leverage Disclosure For further iformatio, see Sectios 3.3 ad 4.2 If the Resposible Etity discloses the followig iformatio: the circumstaces i which the Fud may use leverage ad ay restrictios o its use of leverage The IS 4 ad IS 9 Portfolios do ot employ leverage directly. However, the uderlyig fuds ad maaged accouts i which they ivest may employ leverage. The IS 16E ad IS 16Q Portfolio are leveraged through the use of derivatives ad short sellig to implemet the ivestmet strategy, subject to the overall volatility target of 16% per aum. The volatility target implicitly costrais the level of leverage withi these Portfolios. There is o explicit total leverage limit for the Portfolios i the Ivestmet Maagemet Agreemet. the sources of leverage Leverage for the IS 16E ad IS 16Q Portfolios is through derivatives ad short sellig. whether ay assets are used as collateral, ad the extet to which they are otherwise ecumbered or exposed to set-off rights or other legitimate claims by third parties i the evet of the isolvecy of the Resposible Etity, a service or credit provider or a couterparty The brokers are the oly couterparties to the leveraged trasactios (e.g. derivatives or short-sellig) ad may hold some assets of the Portfolio as collateral for those trasactios. They, ad other assets that are i the possessio of the couterparty, may be exposed to rights of set-off or other claims i the evet of the isolvecy of the Resposible Etity or Trustee, a service or credit provider or a couterparty. the maximum aticipated ad allowed leverage as a multiple of the et asset value of a ivestor s capital i the Fud There is o maximum gross exposure limit o ay of the Portfolios however the level of leverage is iheretly restricted by the applicable volatility target. Historical volatility of the Portfolios is disclosed as part of the mothly ad aual reportig uder Bechmark 2: Periodic reportig. Note: past performace should ot be used as a guide to future performace. a worked example showig the impact of leverage Sice Jauary 2008 a ivestmet i Australia fixed icome had its worst mothly retur i February 2009 losig -1.29%. Over the same period the worst retur i Australia equity markets was % occurrig i October A positio i Australia fixed icome would eed to have bee leveraged 9.8 times to achieve the same loss. Page 17

18 Disclosure priciple 7: Derivatives Disclosure For further iformatio, see Sectios 3.3 ad 4.2 If the Resposible Etity discloses the followig iformatio: the purpose ad ratioale for the use of derivatives ad how they form part of the Fud s ivestmet strategy The IS 4 ad IS 9 Portfolios use derivatives to achieve the desired level of market exposures. The desire is geerally to reduce market exposures i equities, foreig exchage, iterest rates ad commodities, thus decreasig the market risk of the Portfolio. If the desire is to icrease equity market exposures the the omial value of the derivatives must be backed by a equivalet level of cash held by the Portfolio, so as to avoid leveragig the Portfolio. The maagers of uderlyig fuds i which the Portfolios ivest typically use derivatives to both hedge ad geerate returs. There are o implicit limits i place for the use of derivatives by uderlyig fud maagers. The IS 16E ad IS 16Q Portfolio will use derivatives to geerate ivestmet returs. The Portfolios have urestricted total leverage, however total risk is costraied by limitig leverage i ay oe asset (except bods ad iterest rates), ad by restrictig the volatility of the Portfolios ad asset classes. the types of derivatives used The derivatives used curretly are exchage traded futures ad optios. It is aticipated that at least oe prime broker will be appoited i the future, which will allow the use of over-the-couter derivatives. the criteria for egagig derivative couterparties Futures clearig brokers are appoited ad moitored by the Ivestmet Maager. Couterparties to over-the-couter derivatives cotracts must have: a log term credit ratig of A- or better i the case of cotracts where the term to expiry is greater tha oe year; ad a short term credit ratig of A-2 or better i the case of cotracts where the term to expiry is 1 year or less. If the couterparty has o short term ratig the the log term ratig must be A- or better. the key risks to the Fud associated with collateral requiremets of the derivative couterparties The key risks i dealig with ay couterparty icludig derivative couterparties is that they default o their obligatios ad ay fuds or assets held by them are required to be valued at il. Couterparties, icludig their ratigs, are carefully reviewed i order to miimise exposures. Fuds maitaied as collateral with derivative couterparties are miimised i order to further reduce this risk. Further iformatio as to couterparty risks is i Sectio 4: Risks. whether the derivatives are OTC or exchage traded The derivatives are typically traded o recogised exchages. Futures cotracts must be traded o recogised OECD exchages. Whilst permitted, as at the date of this PDS the Portfolios do ot hold ay over-the-couter derivatives. Page 18

19 Disclosure priciple 8: Short sellig Disclosure For further iformatio, see Sectios 3.3 ad 4.2 As the Fud egages i short sellig the Resposible Etity discloses the followig iformatio: the purpose ad ratioale for short sellig, icludig how short sellig forms part of the Fud s ivestmet strategy Short sellig or shortig is permitted for each Portfolio ad the use of futures cotracts ad derivatives such as optios facilitates short exposures i the market. Short sellig is udertake for the Portfolios as part of the ivestmet strategy to beefit from fallig asset prices as well as to reduce log market ad currecy exposures that ivestmet i uderlyig fuds or other assets may itroduce. Short sellig is also a strategy frequetly employed i a umber of uderlyig fuds i order to either geerate returs or reduce risk. A security sold short may be either lookig to gai from a fall i price or to offset the risk itroduced from a log positio. the risks associated with short sellig Short sellig is subject to the theoretically ulimited risk of loss because there is o limit o how much the price of a asset may appreciate. These risks give rise to the possibility that positios may have to be liquidated at a loss ad ot at the time of the Ivestmet Maager s choosig. Further iformatio is give i Sectio 4: Risks. how the risks will be maaged Short sellig risk i the Portfolios is maaged by the Ivestmet Maager through positio size ad ogoig review. The Ivestmet Maager uses a broker to facilitate short exposures i the Portfolios. Page 19

20 Disclosure priciple 9: Withdrawals Disclosure For further iformatio, see Sectios 4.2, 5.3 ad 5.4 The Resposible Etity discloses the followig iformatio: ay sigificat risk factors or limitatios that affect the ability of ivestors to withdraw from the Fud The ability for a ivestor to withdraw from the Fud by withdrawig their uits is depedet upo its liquidity. Withdrawals are allowed from the Fud whe it is a liquid scheme. The Fud s liquidity is iflueced by additioal ivestmets ito the relevat sub-trust ad the liquidity of the uderlyig ivestmets. See Disclosure priciple 5: Liquidity above. Uder the Costitutio, the Resposible Etity has a maximum of 90 days to meet withdrawal requests if the Fud is a liquid scheme. The Resposible Etity must susped withdrawals if the Fud ceases to be a liquid scheme. I that case, all withdrawals would be o the basis provided i the Corporatios Act. The Fud would become a illiquid scheme i the circumstaces described i Sectio 5.3 of the PDS. Further, the Resposible Etity may susped withdrawals for such period as is reasoable i the circumstaces, which may be idefiite, i a umber of situatios, as set out i Sectio 5.4. That sectio also describes the circumstaces i which the Resposible Etity may stagger the meetig of withdrawal requests. how ivestors ca exercise their withdrawal rights Ivestors may withdraw all or some of their uits by writte request. If the request is received before 4pm o a Dealig Day (beig the last busiess day i the week), it will, subject to ay suspesio which may be i force ad the Fud beig a liquid scheme, be processed at the relevat withdrawal price calculated as at the close of busiess o the last busiess day of the ext week. A busiess day is defied as a day which is a busiess day i Sydey, New South Wales. if withdrawal are to be fuded from a exteral facility, the material terms of the facility This is ot applicable, as there is o exteral fudig facility. how ivestors will be otified of material chages to their withdrawal rights (e.g., if withdrawal rights are suspeded) Ivestors will be otified by the Resposible Etity o the website if the Fud becomes illiquid or withdrawals are suspeded for ay other reaso. They will also be otified i the same maer as ad whe the suspesio o loger applies. Ay ivestor who has made a withdrawal request before the suspesio but it was ot processed before that evet, will be idividually otified that the request will ot be processed util the suspesio o loger applies. Page 20

21 sectio 3: fud structure ad ivestmet objectives ad strategy 3.1 Fud Structure The structure of the Fud, the uit classes, the sub-trusts ad the Portfolios is show below. Registered Maaged Ivestmet Scheme Blue Sky SRA Alliace Fud IS 4 Uits IS 9 Uits IS 16E Uits IS 16Q Uits Four Uregistered Trusts Ivestmet Sciece 4 Trust Ivestmet Sciece 9 Trust Ivestmet Sciece 16E Trust Ivestmet Sciece 16Q Trust Portfolios IS 4 Portfolio IS 9 Portfolio IS 16E Portfolio IS 16Q Portfolio A pool of diversified fuds ivestig across a broad rage of asset classes. Hedges out equity market exposures. Target equity like market exposure over the busiess cycle of il. A pool of diversified fuds ivestig across a broad rage of asset classes. Maitaiig a positive exposure to equity markets over the log term. Ca tactically shift equity like exposure depedig o ecoomic coditios. A broad rage of quatitative tradig strategies ad ecoomic models ivestig across global markets. Expresses a tactical view o curret ecoomic coditios through its portfolio allocatios. Expected volatility of the Portfolio similar to equity markets (16%) but with o specific target equity allocatio. A broad rage of quatitative tradig strategies across global markets. Expresses o particular view o curret ecoomic coditios. Expected volatility of the Portfolio similar to equity markets (16%) but with o specific target equity allocatio. As show above, the assets of each class of uits i the Fud are ivested to acquire uits i the sub-trusts. The Ivestmet Maagemet Agreemet i respect of the Fud limits the ivestmet of the assets referable to each class of uits to a ivestmet i ad exposure to the sub-trusts ad to cash ivestmets. Amog the key reasos for the use of the sub-trusts is that: they esure the idetificatio ad segregatio of the assets referable to oe class of uits from the assets referrable to ay of the other classes of uits; each beig a separate legal etity for taxatio purposes assists i esurig that the tax outcome of oe sub-trust does ot impact o that of ay of the other sub-trusts. Page 21

22 3.2 Ivestmet Objectives of the Fud The ivestmet objective of each of the IS 4, IS 9, IS 16E ad IS 16Q class of uits i the Fud is as follows: IS 4 seeks to geerate returs of RBA cash plus 2-3% per aum over a busiess cycle with a superior risk adjusted performace relative to fixed icome domiated coservative fuds. IS 9 seeks to geerate returs of iflatio plus 3-5% per aum over a busiess cycle with a superior risk adjusted performace relative to equity domiated growth fuds. IS 16E seeks to geerate returs of RBA cash plus 6-10% per aum over a busiess cycle with expected portfolio volatility of approximately 16% per aum. IS 16Q seeks to geerate returs of RBA cash plus 6-10% per aum over a busiess cycle with expected portfolio volatility of approximately 16% per aum. 3.3 Ivestmet strategy ad guidelie summary The Fud ivests i a umber of sub-trusts that are all maaged usig the SRA (Strategic Risk Allocatio) madate structure. The traditioal madate structure is geerally kow as Strategic Asset Allocatio ( SAA ). This structure ivolves defied target allocatios ad rages for a limited umber of asset classes, geerally cash, bods, equities ad property. I cotrast, the maager of a portfolio with a Strategic Risk Allocatio, or SRA madate structure is free to allocate to a wide rage of asset classes ad employ ivestmet strategies so as to maximise total returs. I this way, the portfolio is ot restricted to the asset classes used withi SAA ad ot restricted by predefied allowable rages to those asset classes. The mai costrait imposed o the maager is to maage the portfolio to a log term volatility target, the Strategic Risk Allocatio, or SRA. The volatility targets of the uit classes i the Fud ad their correspodig sub-trusts are: 4% per aum for IS 4; 9% per aum for IS 9; 16% per aum for IS 16E; ad 16% per aum for IS 16Q. Usig historical volatility data of previous ivestmet returs, the Ivestmet Maager is able to estimate the risk of each asset i each Portfolio. The Ivestmet Maager is the able to costruct a portfolio to fit the volatility target by bledig differet ivestmet assets, fiacial istrumets ad strategies to achieve the ivestmet objectives of the IS 4, IS 9, IS 16E ad IS 16Q Portfolios. Uder the SRA madate structure the Ivestmet Maager is able to select the ivestmets ad istrumets that it cosiders will maximise the expected retur of the Portfolio, but must do so withi the costraits of each Portfolio. This allows the Ivestmet Maager to desig a more efficiet portfolio i terms of risk ad retur tha may be achieved if the Ivestmet Maager used more vailla ivestmet strategies withi tighter costraits. The beefit arises because the Ivestmet Maager is able to select oly those ivestmets that are expected to be the strogest performers ad is able to structure a more diversified mix of ivestmets. By givig a maager a SRA madate structure the ivestor gives up: a degree of certaity aroud the Portfolio s ivestmets i the future, but gais: a better uderstadig of the total risk beig employed i the portfolio, ad a more efficiet portfolio i terms of risk ad retur. The ivestmet approach used by the Ivestmet Maager to take advatage of the greater flexibility afforded uder the SRA madate structure is explaied i the relevat sectio for each class of uits. Ivestmet strategy for the Portfolios The assets of each sub-trust are ivested i accordace with the ivestmet strategies ad guidelies applicable to that sub-trust. For each Portfolio, the ivestmet strategy uses a flexible approach to cosistetly ad efficietly apply advaced techiques for maagig a portfolio of ivestmet products that is diversified across the wide rage of ivestmets allowed for that Portfolio. IS 4 Portfolio IS 4 has bee developed as a alterative strategy to typical coservative fuds, which rely o a large allocatio to bods, ad limited diversificatio through equities, to achieve their retur objectives (ad typically ru at volatility levels of approximately 4% per aum over the log term). IS 4 geerates returs by ivestig through specialist maagers i a diverse rage of assets i uderlyig fuds or maaged accouts while hedgig out market exposures. The use of maaged accouts or uderlyig fuds of specialist maagers creates diversificatio across may differet equities markets, (e.g. Asia, emergig markets, large ad small capitalisatio) ad o-equity ivestmets (e.g. commodities, currecies, iterest rates ad alterative ivestmets). By selectig maagers with a wide rage of differet asset classes ad strategies, the Ivestmet Maager seeks to avoid cocetratig the risks of particular asset classes or strategies i the Portfolio. The Ivestmet Maager performs a comprehesive due diligece of each maager selected for the Portfolio icludig quatitative ad qualitative aalysis, which icludes a determiatio of the maager s ability to outperform its stated bechmark. Page 22