By: Australian Fund Monitors

Report Date	25 May 2010
Manager	Morgan Stanley
Fund Name	Morgan Stanley FX Alpha Plus Fund (Class A)
Strategy	Currency/FX
Latest Return Date	April 2010
Latest Return	3.06%
Latest 6 Months	14.82%
Latest 12 Months	34.74%
Latest 24 Months	35.63%
Annualised Since Inception	10.00%
Inception Date	23 January 2008
FUM (millions)	AU$4
Fund Overview	The Manager's FX Alpha Risk Controlled strategy is a systematic currency selection process which employs computer modelling within a risk management framework and seeks to profit from changes in the relative valuations of currency pairs. Cash invested is put to work, earning the rate available on cash equivalent investments. At the same time, the Manager aims to achieve additional returns in a risk controlled manner from the currency forward market. The Fund makes allocations across currency pairs, primarily using currency forward contracts and potentially using other derivatives. The models used by the Manager consider interest rates, volatility, correlations and transaction costs to arrive at a portfolio allocation within the parameters of the specified risk and return targets of the Fund. Forward positions are rebalanced systematically based on quantitative model outputs. The models are designed to be sensitive to perceived increases in risk and aim to reduce exposures to those currencies where risks are perceived as increasing. The Manager also maintains a stop loss policy at the portfolio level. The intention of a stop loss policy is to limit the possibility of losses, however, Morgan Stanley does not guarantee that losses will be limited to a particular level. The FX Alpha Plus (Class A) Fund shares the same strategy and processes with the Morgan Stanley FX Alpha Fund. However the FX Alpha Plus Fund (class A) has a higher target volatility of approximately 10% achieved through the use of leverage.
Manager Comments	Morgan Stanley's FX Alpha Plus Fund did well in the first half of April then relied on its risk controls thoughout the latter part of the month to end up +3.06%. The fund focusses on developing markets and aims to limit exposure to G10 countries. In April good returns were generated from long positions in the Indian rupiah and Philippine peso, while a short position in the euro also performed well.
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By: Australian Fund Monitors

Report Date	18 May 2010
Manager	Macquarie Investment Management
Fund Name	MQ Asia Long Short Fund (Cayman) - Class A USD
Strategy	Equity Long/Short
Latest Return Date	April 2010
Latest Return	2.36%
Latest 6 Months	4.00%
Latest 12 Months	21.27%
Latest 24 Months	11.51%
Annualised Since Inception	11.26%
Inception Date	01 October 2005
FUM (millions)	US$197
Fund Overview	The fund employs a quantitative long/short strategy implemented in pan-Asian equity markets. The strategy is underpinned by a stock screening and quantitative company analysis process. Several quantitative stock screens are used to filter the universe to a smaller basket. They seek to exploit market anomalies due to behavioural biases of market participants and combine factors measuring value, quality, momentum and analyst sentiment. After the filtering process, stocks are assessed using a system that analyses the data underlying the quantitative factor scores. Amongst other indicators, this system allows the portfolio manager to view detailed broker forecasts and revisions, time series valuation measures and accruals data. A transparent process, the portfolio construction aims constrains the key risk factors, primarily net country, sector and size exposures. A country selection model is used to determine desired net country exposures.
Manager Comments	Macquarie's Asia Long Short Fund finished April up +2.36%, beating its MSCI Asia Pacific Index benchmark which only managed +0.19%. The manager says that all of their stock screens made a positive contribution for the month. Gross return attributed to the fund's systematic component was +1.5% while non-systematic analysis contributed 1.4%. Alpha generation in the smaller emerging markets in the fund's universe has been particularly strong so the fund is currently increasing exposure to those markets along with improving the fund's shorting ability.
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By: Australian Fund Monitors

Report Date	18 May 2010
Manager	Excalibur Funds Management
Fund Name	Excalibur Absolute Return Fund
Strategy	Currency/FX
Latest Return Date	May 2010
Latest Return	0.30%
Latest 6 Months	4.25%
Latest 12 Months	2.58%
Latest 24 Months	6.82%
Annualised Since Inception	15.26%
Inception Date	01 July 2006
FUM (millions)	US$44
Fund Overview	The fund follows a systematic investment process yet takes advantage of the managers' skill and experience to optimise the timing element of the strategy implementation and improve risk control. The fund also has the flexibility to profit from all market conditions. The fund's strategy predominantly involves short term technically driven contrarian signals in the Australian and New Zealand dollar market and their crosses. The strategy has a focus on risk management and capital preservation at all times with particular attention given to the relationship between volatility and leverage.
Manager Comments	Excalibur says that it received a good sell signal in AUDYEN which contributed to their Absolute Return Fund's result of +2.58% in April. However a lack of follow through to the downside prevented it from being a +5% trade. The manager syas that the current environment of rangebound markets suits Excalibur's model which should contribute to a year of returns close to the upper range of the fund's past years.
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By: Australian Fund Monitors

Report Date	18 May 2010
Manager	Pengana Capital
Fund Name	Pengana Global Small Companies Solution
Strategy	Equity Long
Latest Return Date	April 2010
Latest Return	4.60%
Latest 6 Months	17.55%
Latest 12 Months	40.51%
Latest 24 Months	-14.24%
Annualised Since Inception	-3.93%
Inception Date	01 November 2005
FUM (millions)	AU$29
Fund Overview	Global small companies have the potential to provide attractive returns to investors. Small companies should perform well relative to the broader market over the long term due to their greater risk premium. Small cap investment managers have also demonstrated a significant ability to outperform their benchmarks within this relatively inefficient asset class. The Fund uses a multi manager approach, investing with regional small company investment specialists to produce a global portfolio. To maximise the returns generated the Fund uses active investment managers with portfolios that are not overly diversified (the Fund will generally have exposure to between 40 and 80 stocks in each region).
Manager Comments	Pengana's Global Small Companies Fund returned 4.6% in April, taking the fund's year to date return to 12.6%. The manager says that the major contribution to April's performance came from stock selection in Asia, as well as Japan and Europe. The US portfolio underperformed its benchmark. Looking ahead the manager is concerned about macroeconomic issues, centering around the over-leveraged balance sheets of several European countries, which could turn into risks for the worlwide economic recovery.
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By: Australian Fund Monitors

Report Date	12 May 2010
Manager	Fortitude Capital
Fund Name	Fortitude Capital Absolute Return Trust
Strategy	Equity Market Neutral
Latest Return Date	April 2010
Latest Return	0.43%
Latest 6 Months	0.80%
Latest 12 Months	5.11%
Latest 24 Months	15.44%
Annualised Since Inception	10.07%
Inception Date	15 February 2005
FUM (millions)	AU$25
Fund Overview	Fortitude Capital Absolute Return Trust is a multi-strategy market neutral fund specialising in listed Australian equities and derivatives. The core philosophy is the management of risk through a long volatility overlay incorporating listed equity and index derivatives. The multi-strategy approach includes M&A, Yield, Convergence and Long/Short strategies. The portfolio managers adopt an aggressive approach to managing downside risk whilst positioning the portfolio to benefit from positive alpha.
Manager Comments	Fortitude Capital's Absolute Return Trust posted a +0.43% return for April, largely due to the fund's overlay strategy. The fund took advantage of Lihir Mining's announcement that it had rejected Newcrest's acquisition proposal which caused a jump in Lihir's share price and the strategy of maintaining exposure through call options paid off. Short dated put options over CSL also generated good returns following a price drop caused by the release of a poor profit result by a major North American competitor. Increased market volatility generated good opportunities for the fund's convergence portfolio. Volumes increased in both Australia and Canada following an announcement that a subsidiary of Canadian company UraniumOne had bought shares in Paladin Energy. The fund benefitted from its yield portfolio during April but takeover positions were not as successful as the ACCC indicated it would oppose a bid for AXA Asia Pacific by National Australia Bank.
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By: Australian Fund Monitors

Report Date	12 May 2010
Manager	Herschel Asset Management
Fund Name	Herschel Absolute Return Fund
Strategy	Equity Long/Short
Latest Return Date	March 2010
Latest Return	4.36%
Latest 6 Months	5.62%
Latest 12 Months	27.24%
Latest 24 Months	26.82%
Annualised Since Inception	17.86%
Inception Date	01 May 2006
FUM (millions)	AU$37
Fund Overview	The Herschel Absolute Return Fund is a long-short Australian equities fund which is expected to average 50% net long through an investment cycle. The objective of the fund is to achieve consistent, double-digit rates of return, with an over-arching philosophy of capital protection. The Fund will usually invest in a portfolio, consisting of both long and short positions, of securities of 15 to 45 companies.
Manager Comments	Herschel's Absolute Return Fund reported a gain of 0.36% in April despite the Australian All Ordinaries Accumulation Index falling 1.18%. The largest positive contributions to the result were made by CSG, Avoca Resources and short Share Price Index futures contracts (hedging long positions) while detractors included Virgin Blue, Asciano and Ten Network. Net equity market exposure for the fund including derivatives was reduced to 47.2% by the end of the month, consisting of 71.0% long and 23.8% short.
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By: Australian Fund Monitors

Report Date	11 May 2010
Manager	MM&E Capital Limited
Fund Name	MM&E Capital Investment Trust No. 1
Strategy	Event Driven
Latest Return Date	April 2010
Latest Return	0.83%
Latest 6 Months	1.86%
Latest 12 Months	5.24%
Latest 24 Months	-2.39%
Annualised Since Inception	7.40%
Inception Date	01 July 2002
FUM (millions)	AU$19
Fund Overview	The fund is an event-driven Australian equities fund with a short-term perspective (six months or less). It aims to earn positive returns irrespective of overall moves in related market indices. Its investment strategies include merger/takeover arbitrage, convertible/preference share arbitrage, placements/sell downs, IPOs, rights issues and share buybacks. The fund holds liquidity in floating-rate income securities, buy and write situations, and cash. The fund hedges a significant proportion of its long positions with short positions and/or written call options. All of the Trust's investments are in securities listed on either the ASX or the SFE (except, on occasion, where the shares of a foreign company are short-sold to hedge the takeover of an ASX-listed company). It allocates a maximum 20% of funds in any situation and requires committee approval for investments above 5%. A stop-loss is incorporated at 20%.
Manager Comments	In a month when sharemarkets fell, MM&E Capital's Investment Trust No. 1 was happy to achieve a positive return of 0.83%. The manager took advantage of takeover situations including the contested bidding war for zinc and lead producer CBH Resources, and the purchase of Aurox Resources by Atlas Iron. In convertibles the fund benefitted from increasing value of Paperlinx's Redeemable Preference Shares while a put-protected position in Telstra also rose ahead of an expected resolution with the Federal Government over the NBN issue.
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By: Australian Fund Monitors

Report Date	11 May 2010
Manager	Lanterne Strategic Investors Pty Ltd
Fund Name	Lanterne Arran Fund
Strategy	Equity Long/Short
Latest Return Date	April 2010
Latest Return	2.04%
Latest 6 Months	5.74%
Latest 12 Months	17.12%
Latest 24 Months	27.32%
Annualised Since Inception	9.58%
Inception Date	01 August 2004
FUM (millions)	US$38
Fund Overview	The fund investment objective is to achieve superior absolute returns in all market environments, with an emphasis on capital preservation. Lanterne's Arran is an active long/short equity fund that invests in predominantly Australian top-100 stocks. It pursues three main strategies, which begin with a quantitative process to achieve market neutrality, and are overlaid with qualitative decisions that introduce long or short biases. The philosophy is to take advantage of investment possibilities regardless of the market environment, whilst protecting the downside through active risk management.
Manager Comments	Lanterne says that their Arran Fund's return of +2.04% in April was due to the fund's de-risking throughout the month which saw long positions in materials and mining names being reduced while shorts in banks were increased. Lanterne believes that the market has recently become oversold on a medium term view so they have been accumulating long positions in names identified by their research process. Once the market settles down, the manager believes that those companies will be recognised as significantly undervalued by the pension funds that dominate the Australian Equity market which will see them rally strongly.
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By: Australian Fund Monitors

Report Date	11 May 2010
Manager	Regal Funds Management
Fund Name	Regal Tasman Market Neutral Fund
Strategy	Equity Market Neutral
Latest Return Date	April 2010
Latest Return	2.23%
Latest 6 Months	8.30%
Latest 12 Months	54.99%
Latest 24 Months	43.24%
Annualised Since Inception	23.42%
Inception Date	03 May 2007
FUM (millions)	AU$23
Fund Overview	The Tasman Market Neutral Fund aims to maximise returns with only moderate risk and little correlation to equity markets. Investments are usually based on fundamental research and may be held for months or years. Hedging is usually achieved through single stock exposures. The fund aims to limit the volatility of returns to less than 15% pa and maintains a beta neutral portfolio. Risk limits (stock, sector, liquidity, systematic etc) are maintained to help achieve the volatility target. Most of the investments are in Australia but investments are also made in other countries on an opportunistic basis (mainly in Europe and no emerging markets).
Manager Comments	Regal's Tasman Market Neutral Fund was the manager's best performing fund in April, generating a return of +2.23% off both long and short positions. Successful shorts included Harvey Norman, JB Hi-Fi, Woolworths and CSL which fell 11% during April. Winners on the long side included FKP, an aged living operator, and Lihir Gold which the manager increased the fund's position in after Newcrest said it had approached Lihir about a merger. Regal reports that the Fund's daily volatility is at record lows and correlation to the market also remains low.
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By: Australian Fund Monitors

This month we include comments on two significant announcements from the Australian government, both of which have significant implications for the industry and investors alike:

1. The proposed introduction of a "Super Tax" on Australia's resources industry, which has sent shivers through investors, and
2. The proposed changes to the financial advisory and funds management industry, banning the payments of commissions and volume rebates, and enforcing fiduciary duties on advisors.

As usual we include detailed analysis of performance for each strategy, industry comment and ranking tables for March 2010.

For detailed analysis of performance for each strategy, industry comment and ranking tables, please open the attached .pdf file.