DAFNA

Fund Investment Objectives

Investment Strategies - The Select Master Fund (Class C Shares and Class C-R Shares) The Select Master Fund's strategy is similar in nature to the Long/Short Master Fund's strategy and involves making event-driven long and short investments in public lifescience companies, primarily in the biotechnology field and secondarily in the medical device and pharmaceutical fields. However, the Select Master Fund will generally hold fewer positions and be exposed to greater volatility than the Long/Short Master Fund. This investment strategy attempts to capitalize on the Investment Manager's ability to exploit market inefficiencies that result from the complexity of these companies' technologies and the clinical regulatory environment and marketplace. This is mainly done by rigorously evaluating future outcomes of key events. The Select Master Fund's strategy may be enhanced by Private Investments in cases where the Investment Manager can negotiate attractive terms. The securities that will be purchased in Private Investment transactions include common stock issued at a discount, convertible securities with embedded put and call features, high-yield debt instruments with equity participation, and warrants to purchase common stock. Investments will be made predominately in target companies in which the Investment Manager identifies significant near-term events that will likely affect a company's stock price upwards or downwards. Such significant events include, but are not limited to: clinical trial results, unexpected side effects, market trends, additional indications for a drug or device, sales numbers, significant partnerships or joint ventures. The probability of positive or negative outcomes of these events, as well as their timing, will be analyzed in detail and is the basis of the Investment Manager's strategy. In some cases, such events may be likely to affect more than one company, creating an opportunity for pairs trading or risk arbitrage opportunities. The Select Master Fund combines this fundamental analysis with attention to risk reduction, although risk is expected to be greater in the Select Master Fund than in the Long/Short or Market Neutral Master Funds. The Investment Manager will seek to reduce risks at the specific company level and at the portfolio level by a disciplined structured investment process, which relies on rigorous data analysis and semi-quantitative analytic tools. This will sometimes require investments in companies that are not likely to have a significant near term event, in order to diminish the market exposure resulting from a position that is likely to have such an event. The analysis of potential investments will take advantage of the significant scientific and medical background of the members of the Investment Manager, their experience in stock valuations and trading operations, as well as their wide network of clinical researchers, practicing physicians and colleagues in the lifescience field. The Select Master Fund's strategy is long-biased and sector concentrated and is therefore subject to greater volatility than the general stock market and more diversified funds. The Investment Manager will hedge certain of the fund's investments via pairs trading, trading OTC equity options, and in rare instances index hedging. The Investment Manager also believes that it can reduce volatility and short-term systematic risk by (1) concentrating on company-specific events that might impact a company's stock price and (2) maintaining short equity and equity option positions. However, the Select Master Fund should not be considered market neutral. Notwithstanding its hedging strategies, the Select Master Fund's returns are expected to be highly volatile. Leverage is not expected to be an integral part of the Select Master Fund's investment strategy. The Select Master Fund will generally use moderate, but could use a high degree of, leverage, which will generally be in the form of short positions in common stock. Due to the short-term event driven nature of this strategy, a substantial amount of the Select Master Fund's taxable gains and losses will be characterized as short-term. The Select Master Fund will be semi-diversified. The Investment Manager expects the Select Master Fund, at any given time, to hold 10-25 long positions and 8-25 short positions. The net long exposure, [measured by ($value of all long positions minus $ value of all short positions) divided by (total $ amount under management)], is expected to vary between 20 to 80% depending on market conditions and the availability of attractive short-selling opportunities. The Investment Manager will generally attempt to limit the Select Master Fund's initial commitment to any one position to no more than 8% of its capital, but this level may be exceeded from time to time. This Fund also has an onshore fund.