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  • Aurora Fortitude Absolute Return Fund Aims to provide a high rate of return, comprising both income and capital growth over both

    rising and falling equity markets

    PRODUCT DISCLOSURE STATEMENT No. 1

    DATED 7 October 2010

    Aurora Fortitude Absolute Return Fund, ARSN 145 894 800, APIR Code: AFM0005AU

    Issuer: Aurora Funds Management Limited, ABN 69 092 626 885 AFSL No. 222110

  • (i)

    Important Notice and Disclaimer

    This PDS, which is dated 7 October 2010 has not been, and is not required to be, lodged with the Australian Securities and Investments

    Commission (ASIC). No responsibility as to the contents of this PDS is taken by ASIC. Investment in the Aurora Fortitude Absolute Return

    Fund (Trust or Fund) is offered by Aurora Funds Management Limited ABN 69 092 626 885 (referred to in this PDS as AFM, the

    Responsible Entity, Issuer, we, our, or us). No Aurora Group company other than us makes any statement or representation in this

    document. The information contained in this PDS is general only and does not take into account your individual investment objectives,

    financial profile, or requirements. You should assess the information within the PDS, and consider talking to a financial adviser, before

    making an investment in the Fund. All individual or joint investors in the Funds must be at least 18 years of age.

    The information in this PDS is up to date at the time of preparation. However, some information and terms can change from time to time. If a

    change is considered materially adverse we will issue a supplementary or replacement PDS. For updated or other information about the Fund

    (such as performance), please consult your financial planner, call us on 1300 553 431 or visit our website www.aurorafunds.com.au. We will

    send you a copy of the updated information free of charge upon request.

    The Fund may make investments directly or indirectly by investing in other funds (including funds related to or managed by a member of the

    Aurora Group) that have investment objectives and authorised investments that are consistent with the relevant Fund. This structure helps to

    minimise transaction costs and can enhance diversification.

    The Funds constitution permits a wide range of investments and gives us as Responsible Entity broad investment powers. We may vary the

    investment objectives, strategies, benchmarks, asset allocation ranges and processes of the Fund set out in this PDS. We will give Unit holders

    written notice of any material variation we believe they would not have reasonably expected.

    Where this PDS is provided in electronic form, you must print all pages including the Application Form. Units in the Fund will not be issued

    unless you use the Application Form attached to either the paper or electronic copy of this PDS, or the approved electronic application facility.

    The Prime Broker, as at the time of preparation of this PDS, is UBS AG, Australia Branch (ARBN 088129613, AFSL 231087) (referred to

    throughout this PDS as the Prime Broker). The Custodian, as at the time of preparation of this PDS, is UBS Nominees Pty Limited (ABN 32

    001 450 522, AFSL 231088) (referred to throughout this PDS as the Custodian). The Custodian and Prime Broker may be replaced from time

    to time by the Responsible Entity. The Prime Broker and Custodian nor any of its employees, associates and subsidiaries has not prepared this

    PDS and is not responsible for its contents, nor do they give any guarantee of the return on your investment, or repayment of capital or

    particular rates of return on income and capital.

    The Responsible Entity and its employees, agents or officers do not guarantee the success, repayment of capital or any rate of return on income

    or capital or the investment performance of the Fund. Your investment does not represent deposits or other liabilities of the Aurora Group or

    the Prime Broker and Custodian, or any related company. Your investment can be subject to investment risk, including possible delays in

    repayment and loss of income and principal invested and Aurora and AFM do not in any way stand behind the capital value and/or rates of

    return of the Fund.

    This PDS is not an offer or invitation in relation to the Units in any place in which, or to any person to whom, it would not be lawful to make

    that offer or invitation. The distribution of this PDS outside Australia may be restricted by the laws of places where it is distributed and

    therefore persons into whose possession this document comes should seek advice on and observe those restrictions. Failure to comply with

    relevant restrictions may violate those laws.

    We authorise the use of this PDS for investors who wish to access the Fund through an Investor Directed Portfolio Service (IDPS, or IDPS-

    like schemes commonly known as a master trust or wrap account) or a nominee or custody service. We are not responsible for the operation

    of an IDPS or IDPS-like service.

    Unless otherwise stated, all amounts specified in this PDS include GST and are net of any input tax credits or RITC, where available. No

    image contained in the PDS represents an asset of the Fund. Unless identified to the contrary, all references to monetary amounts are to

    Australian dollars. Capitalised terms have the meaning given to them in the Glossary.

  • - 2 -

    Contents

    Key features 3

    The investment strategy and process 4

    What are the risks? 6

    Fees and other costs 9

    Taxation for Australian residents 13

    What else do I need to know? 15

    Withdrawing your investment 20

    Making an investment 21

    Glossary / Dictionary 22

    Application Form & AML 24

    The Fund may be suited to:

    investors seeking consistent long term absolute returns and half-yearly income payments

    superannuation funds, charities and individual investors (retail and wholesale)

    The Aurora Group

    With in excess of $500 million in funds under management and administration (as at the date of this PDS),

    Aurora Funds Limited (Aurora Group) provides asset management and responsible entity/ trustee services for

    over 3,500 Australian and New Zealand investors. Aurora Funds Limited (Aurora) was listed on the ASX in

    July 2010 with the ASX Code: AFV.

    The wholly owned subsidiary Aurora Funds Management Limited (AFM) is the Issuer and Responsible Entity

    of the Fund. Prior to the listing of Aurora Funds Limited, the Fund was issued by Fortitude Capital Pty Ltd

    (Fortitude), for which it won the Australian Hedge Fund of the Year in both 2008 and 2009.

    The listing of the Aurora Group has seen the expansion of the Groups investment and research capabilities -

    which now comprises an experienced team of 6 investment professionals.

    The Aurora Group is the issuer /distributor of the:

    Aurora Sandringham Dividend Income Trust (ARSN 108 249 154) ASX Code: AOD

    Aurora Sandringham Australian Equity Income Trust ASX Code: ABW

    Aurora Global Infrastructure Income Trust (ARSN 127 692 406) ASX Code: AIB

    Aurora Property Buy-Write Income Trust (ARSN 125 153 648) ASX Code: AUP

    van Eyk Blueprint Alternatives Plus (ARSN 121 722 521) ASX Code: VBP

    CORALS Commodities Fund (ARSN 131 196 882)

    Aurora Sandringham Global Income Trust (ARSN 131 291 499)

    Aurora Fortitude Absolute Return Fund (ARSN 145 894 800)

    You may contact AFM at:

    Telephone: 02 9080 2377 or 1300 553 431

    Facsimile: 02 9080 2378

    Email: enquiries@aurorafunds.com.au

    Website: www.aurorafunds.com.au

    Post: PO Box R1695

    Royal Exchange NSW 1225

  • - 3 -

    Key features Further Details Type of Fund and

    timeframe

    Type of Investment The Fund is an unlisted registered unit trust.

    Suggested timeframe At least 5 years.

    Investment fundamentals

    Benchmark RBA Cash Rate. See www.rba.gov.au for more information on the Benchmark.

    Investment Objective The Fund aims to achieve a high rate of return, comprising both income and capital

    growth (and preserve the capital of the Fund) over both rising and falling equity markets.

    Please note that while we aim to achieve this objective, the returns are not guaranteed.

    Page 4

    Investment Process The Fund seeks to meet the Investment Objective through using many different

    investment strategies that allow the Fund to have very little correlation to the Australian

    stock market. These strategies may include: long/short strategies, convergence trading,

    merger and acquisition trading, arbitrage opportunities, derivative strategies.

    The Fund may utilise leverage from time to time.

    Please see pages 22 to 23 for a description of key terms

    Page 4

    Investment universe In addition to holding cash, the Fund may hold common stock, preferred stock, preference

    shares, warrants or rights to subscribe to or purchase such securities or other equity

    instruments in relation to entities that are listed (or about to be listed) on the ASX, NZX

    and other foreign markets, or derivative instruments including futures and options listed

    on the ASX, NZX and Sydney Futures Exchange. The Fund may trade in foreign listed

    securities for the purpose of M&A and arbitrage.

    Net Asset allocation ranges Cash 0 100%

    Net equities exposure -25% 25% (including derivatives and convertibles)

    Minimum transaction and

    balance requirements1

    Minimum Investment $100,000 and