Investment Strategy

The Fund seeks to achieve the investment objective by investing in companies listed on the ASX that Aurora expects will pay franked dividends. These companies will either already pay franked dividends or currently hold franking credits and may pay dividends in the future. Aurora may achieve its goals through acquiring securities in any ASX listed company, including ASX listed investment companies and trusts (LIC or LIT).  Where securities in a LIC or LIT are purchased, they will typically be purchased at a discount to their underlying net tangible assets (NTA) per
security. Aurora believes that purchasing LIC or LIT securities that trade at a discount to their NTA per security will assist in reducing volatility whilst increasing the gross dividends received on the investment. Aurora may seek to actively engage with the management of its investee entities to assist in realising underlying value and/or franked dividend income. Investments will be actively managed and selected at the discretion of Aurora. Returns of the Fund are targeted from a combination of both dividend income and capital growth.

The Fund may also short sell securities (e.g. by borrowing those securities and selling them) to achieve its investment objectives and/or to reduce part of the Fund’s equity market exposure. Selling borrowed securities may reduce the risk of loss from adverse market movements. This risk reduction is expected because most ASX traded securities are positively correlated. That is, on average, their prices tend to go up and down together. Consequently, when the market falls, we expect the value of the securities the Fund owns (the long securities) will fall. Similarly, when the market falls, we expect the value of the securities the Fund is short will rise. When the market falls, the profit on the short securities is expected to partially offset the loss on the long securities. The extent of this offset will depend upon the value of the short securities relative to the long securities and the extent to which the short securities and long securities are correlated. The opposite is
expected to occur when the market rises.

Due to the nature LIC and LIT securities being diversified investment vehicles, Aurora adopts a ‘look through’ approach when considering its concentration in specific security holdings pursuant to its PDS (i.e. the holding in any of the Funds third party LIC or LIT investments is considered to be a holding in its separate underlying investments and not as a single holding). Where hedging is used, it is possible the securities the Fund is short prove to be negatively correlated to the securities the Fund is long. In this situation, the volatility of the Fund may be greater than the markets. Derivatives may be used to improve the efficiency of implementing the investment strategy. Derivatives are generally expected only to be held for short periods of time and may not be used to leverage the portfolio.

Aurora aims to invest the Fund, generally, in a portfolio of 10-15 companies and other entities, however, concentrated positions of up to 50% of the Fund’s NAV may be held in a single position during periods that Aurora is actively engaging with an investee entity. Where the Fund holds concentrated positions, this may increase volatility in NAV. Gross market exposure cannot exceed 250% of NAV, where gross market exposure is defined as the sum of all net long positions plus the sum of the absolute value of all the net short positions.

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